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UNIVERSITY  OF  CALIFORNIA 
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i.Oo  A.\GE.LES 
LfHRARY 


W      C.    GORGAS 

From 

W.  C.  Gorgas 

Of  Panama  Canal  Fame.    Surgeon  General   U.  S.  Army 

"The  Problem  of  the  Unemployed  is  the  clearest  exposition 
of  the  question  I  have  ever  read.  I  strongly  commend  it  to 
any  one  interested  in  the  subject." 


(^.C  vCW-u/Y^^ 


From 

N.  O.  Nelson 

N.  O.  Nelson  Manujacliiring  Company,  St.  Louis,  Mo. 

"It  will  interest  every  thoughtful  reader  who  gets  it  in  hand. 
Even  the  fiction  reader  will  like  it  for  a  change." 

N.  O.  NELSON. 


I'rnni 

George  Foster  Peabody 

Of  the  Peabody  Fund 

"I   find   myself  greatly  impressed  with   the  notable  value 
of  the  book." 

GEORGE  FOSTER  PEABODY. 


R.    S.    LOVETT 

From 

R.  S.  Lovett 

Chainmm  of  Board,    Union  Pacific  Railway  Company 

"I  have  read  The  Problem  of  the  Unemployed  with  a  great 
deal  of  interest  and  profit.  It  is  a  valuable  contribution  to  a 
discussion  that  should  engage  the  attention  of  every  thoughtful 
person." 


W/^ 


From 

Andrew  D.  White 

First  President  of  Cornell    University 

"I  have  read  parts  of  The  Problem  of  the  Unemployed 
with  great  interest.  I  congratulate  the  author  upon  what 
seems  to  me  a  work  calculated  to  arouse  much  helpful  thought." 

ANDREW  D.  WHITE. 


From 

Francis  I.  Du  Pont 

Du  Pont  Powder  Company,  Wilmington,  Delaware 

"It  is  clear,  scientific  and  unprejudiced." 

FRANCIS  I.  DU  PONT. 


FRANK    P.    HOLLAND 

I'rom 

Frank  P.  Holland 

I'lthlisher  Farm  and  Ranch,  Dallas,  Texas 

"The  Problem  of  the  Unemployed  analyzes  the  cause  of 
unemployment  and  poverty  and  outlines  a  readjustment  *  *  * 
which  will  give  every  worker  at  all  times  a  job.  The  book 
deserves  a  large  circulation." 

From 

Herbert  Quick 

bldilor  Farm  and  Fireside,  Springfield,  Ohio 

"I  read  The  Problem  of  the  Unemployed  with  unflagging 
interest  from  beginning  to  end.  In  clearness  of  statement, 
wealth  of  illustration  and  dignity  and  sobriety  of  method  it 
is  a  work  worthy  of  the  highest  jiraisc." 

HERBERT  QUICK. 

h'rinu 

Hamlin  Garland 

The  Author 

"I  found  in  The  Problem  of  the  Unemployed  a  clear,  sane 
and  h(jpeful  analysis  of  our  social  conditions."    ■"    '    ^  •«  * 

HAM  LI  X  C.XRL.Wl). 


C.    H.    INGERSOI.L 

From 

C.  H.  Ingersoll 

Moiiifacturer  Ingersoll  Watches 

"Your  book  gets  at  the  meat  of  the  proposition.  To  re- 
Ueve  unemployment  it  is  necessary  to  create  more  jobs.  I 
wish  the  book  could  be  read  by  every  manufacturer,  merchant 
and  business  man  in  the  country." 


Fro)}i 

Lincoln  Steffens 

"It  is  a  remarkable  book.  It  answers  a  question  which  is 
in  everybody's  mind.  It  answers  it,  I  say,  and  clearly.  I 
think  many  men  will  be  grateful  to  you  for  it,  as  I  am." 

LINCOLN  STEFFENS. 

From 

Rt.  Rev.  Chas.  D.  Williams,  D.  D. 

Bishop  Episcopal  Church,  Diocese  of  Michigan 

"It  has  the  advantage,  which  few  books  on  this  subject 
have,  of  indicating  a  solution  of  the  problem,  i  do  noc  see 
how  any  man  with  unbefuddled  mind  can  avoid  the  conclu- 
sions of  vour  argument.  The  book  is  desrined  to  do  great 
good."     '  CHAS.  D.  WILLIAMS. 


WARREN    WORTH    BAILEY 

Fram 

Warren  Worth  Bailey 

Editor  Johnstown   Democrat,   Jolmsto'ivii,    Pa.     Just   re-elected  to 
Congress 

"I  believe  it  is  the  very  best  thing  along  the  line  lliat  has 
yet  been  printed." 


S^H-^-ri^    /hJ>r^/ZuJ.<^ 


From 

F.  P.  Walsh 

Chair  man   U.  S.  Commission  on  Industrial  Relations 

"The  Problem  of  the  Unemployed  is  one  of  the  most  sig- 
nifieant  and  illuminating  contributions  to  the  economic  tliought 
of  the  dav." 

F.  P.  WALSH. 


From 

John  DeWitt  Warner 

F.x-Congressman,   New  York 

"I  find  it  with  one  exception  the  clearest  and  most  at- 
tractive discussion  of  our  social  and  political  economy 
since  Adam  Smith's  Wealth  of  Nations." 

JOIIX   DcWITT  WARXER. 


J.    S.    RICE 

From 

J.  S.  Rice 

President   Union  National  Bank,  Houston,  Texas 

"I  have  read  the  book.     It  is  a  good  thing.     I  subscribe  for 
five  extra  copies  to  distribute  among  my  friends." 


From 

R.  A.  Pleasants 

Chief  Justice  of  Texas  Court  of  Civil  Appeals,  Galveston,  Texas 

"It  is  not  a  dry  treatise  on  PoHtical  Economy,  but  a  clear 
and  forcible  argument  upon  a  question  of  most  vital  interest 
to  society." 

R.  A.  PLEASANTS. 


From 

Horace  Chilton 

Formerly   U.  S.  Senator  from  Texas 

"The  Problem  of  the  Unemployed  has  proven  a  very  in- 
teresting book  to  me." 

HORACE  CHILTON. 


RUFUS    CAGE 

Fni))i 
Rufus  Cage 

President  School  Board,  Houston,  Texas 

"I,t  answers  all  the  questions  suggested  in  the  introductory 
cnapter     A  change  is  inevitable." 


From 

Edward  Osgood  Brown 

Justice  Illinois  Appellate  Court 

"To  my  great  pleasure  I  have  at  last  found  time  to  read 
The  Problem  of  the  Unemployed.  It  is  clear,  attractive  and 
very  interesting." 

EDWARD  OSGOOD  BROWN. 


I'mm 

Prof.  J.  H.  Dillard 

New  Orleans 

"It  is  a  splendid  book.     I  like  it  exceedingly.     It  is  sure  to 
receive  earnest  consideration  in  the  minds  of  earnest  men." 

PROF.  J.  H.  DILLARD. 


THE  ANONYMOUS  AUTHOR 

As  he  appeared  many  years  ago  when  he  first  became  interested  in  the  sub- 
ject indicated  by  the  followmg  questions: 

Improvements  in  labor-saving  processes  make  it  easier  to 
jjroduce  the  necessities  and  comforts  of  life,  then  why  should  not 
such  improvements  also  make  it  easier  for  all  to  obtain  and 
enjoy  the  necessities  and  comforts  of  life? 

Why  should  not  the  intensity  of  the  struggle  for  things  be 
lessened  by  inventions  which  make  it  less  difficult  to  produce 
things,  and  why  should  not  life  for  all  of  us  thereby  be  made 
less  strenuous  rather  than  more  strenuous? 

Why  should  the  production  of  wealth  be  continually  curtailed 
by  panics,  dull  times,  and  the  involuntary  idleness  of  vast  num- 
bers of  workers,  whose  constant  employment  would  enormously 
add  to  the  prosperity  and  wealth  of  the  nation? 

Is  there  a  remedy?  If  so,  does  it  point  toward  individualism 
and  freedom  or  toward  socialism  and  slavery? 

Does  the  remedy  require  the  confiscation  of  private  property, 
or  does  it  admit  of  compensation  in  full  to  all  who  would  other- 
wise be  injured  by  its  adoption? 

Must  there  not  be  some  kind  of  a  readjustment  if  our  civiliza- 
tion is  to  survive  against  the  forces  of  increasing  want  in  the 
midst  of  increasing  plenty?  Read  Lord  Macauley's  celebrated 
letter  written  in  1855,  which  President  Garfield  said  startled 
him  like  "an  alarm  bell  at  night."     See  page  211,  infm. 

THE  AUTHOR. 


The  Problem  of  the  Unemployed 

Anonymous. 


It   demonstrates   with   mathematical   certainty   the 
cause  of  dull  times  and  involuntary  idleness.     It 
shows  why  improvements  in  labor-saving  ma- 
chinery fail  to  increase  wages  and  lessen  the 
intensity  of  the  struggle  for  existence.    It 
points  to  the  remedy;  a  remedy  bene- 
ficial alike  to  employer  and  employee ; 
a   remedy   which   could  be  adopted 
u'ithout  confiscating  pnvate  i^rop- 
erty  or  even  impairing  its 
selling  value. 


>  J 1 »  > »     '  > '  J  , 


,'    '      '  ,  "  > '   '  • 


SOLD  BY  SUBSCRIPTION  ONLY 


Second  Edition 
A.  D.  19!5 


Price  $1.00 

THE  PROBLEM  OF  THE  UNEMPLOYED 
PUBLISHING  CO. 

Houston,  Texas 


148245 


Author's  Edition  for  Private  Circulation. 

Copyrighted   1905  by 

J.  J.  Pastoriza,  Trustee. 


"  •    »     f    ,    c  a 


A' 
I 

li— 

( 


H" 


TO  THE  WIFE 

WHO,    AS    COMPANION,    COMRADE    AND    MENTOR, 

FOR  MORE  THAN  TWENTY-FIVE   YEARS 

HAS  GLADDENED  THE  HEART 

AND  THE  HOME  OF  THE 

AUTHOR,  THIS  WORK 

IS  AFFECTIONATELY  DEDICATED. 


PUBLISHER'S  NOTE 

The  Problem  of  the  Unemployed,  though  an  in- 
tensely interesting  discussion  of  the  most  important 
problem  confronting  our  civilization,  is  nevertheless 
a  cold-blooded  work  on  political  economy,  entirely 
devoid  of  sentiment. 

While  it  discloses  the  simple  and  easily  understood 
natural  laws  which  control  the  distribution  of  wealth, 
the  subject  is  not  confused  by  advocacy  of  socialism, 
the  single  tax  or  any  other  so-called  reforms.  The 
underlying  cause  of  industrial  disease  is  clearly 
pointed  out.  The  remedy  which  would  cure  it  is 
shown.  But  the  author  claims  that  it  is  shown  for 
the  purpose  of  proving  by  setting  forth  the  effects 
which  would  follow  its  adoption,  that  his  diagnosis 
of  the  disease  is  correct.  To  the  statesman  and  the 
politician  is  left  the  task  of  determining  the  possi- 
bility and  the  practicability  of  securing  popular  as- 
sent to  legislation  which  would  cure  the  disease. 
Hence  liberal-minded  people  of  all  shades  of  econom- 
ic opinion  cordially  recommend  the  book  as,  in  the 
language  of  Mr.  Chief  Justice  Pleasants,  "A  clear 
and  forcible  presentation  of  a  question  of  most  vital 
interest  to  society." 


CONTENTS 

CHAPTER  I. 

INTRODUCTORY. 

Questions  for  the  Political  Economist  to  Answer. 

CHAPTER  H. 

DEFINITIONS. 

Of  Wealth,  Land,  Capital  and  Labor;  and  of  Rent, 
Interest  and  Wages. 

CHAPTER  HL 

THE  NATURE  OF  INTEREST. 

CHAPTER  IV. 

THE  NATURE  OF  RENT. 

CHAPTER  V. 

EFFECT  OF  IMPROVEMENTS. 

In  Labor-Saving  Machinery  and  of  Progress  Gen- 
erally on  Rent,  Interest  and  Wages. 

CHAPTER  VI. 

THE   ALL   IMPORTANT   QUESTION. 

Why  do  not  Improvements  in  Labor-Saving  Processes 
Naturally  Increase  Wages? 


Contents. 

CHAPTER  VII. 
OBSTACLES  TO  EMPLOYMENT  OF  CAPITAL  AND  LABOR. 

CHAPTER  VHL 

EFFECT  OF  A  REAL  SCARCITY  OF  LAND  ON  RENT, 
INTEREST  AND  WAGES. 

CHAPTER  IX. 

EFFECT  OF  AN  ARTIFICIAL  SCARCITY  OF  LAND   ON  RENT, 
INTEREST  AND  WAGES. 

CHAPTER  X. 

LABOR'S  DEPENDENCE  ON  CAPITAL. 

CHAPTER  XI. 
THE  WAGE  FUND  OR  PERMANENT  WEALTH. 

CHAPTER  XII. 

THE  DISTRIBUTION  OF  WEALTH. 

Causes  Affecting  the  Division  of  Wealth  between 

Land  Owners  on  the  one  hand  and  Capitalists 

and  Laborers  on  the  other  hand.    Also  the 

Law  of  Rent  and  Its  Corollary,  the 

Law  of  Wages. 

CHAPTER  XIII. 

THE  DISTRIBUTION  OF  WEALTH,  Continued. 
Causes  Affecting  the  Division   of  Wealth  between 
Capitalists  and  Laborers,  and  between  Em- 
ployers and  Employees. 


Conteiits. 
CHAPTER  XIV. 

THE  ULTIMATE  REMEDY  AND  WHY  IT  SHOULD  BE 
CONSIDERED  BY  THE  POLITICAL  ECONOMIST. 

CHAPTER  XV. 

IMMEDIATE   NATIONALIZATION   OF   LAND,   WITH 
COMPENSATION  TO  LAND  OV/NERS. 

CHAPTER  XVI. 

THE  NATIONALIZATION  OF  LAND,  Continued. 

Speculations  in  Regard  to  Effects  which  would  flow 

from  it,  Including  its  Effect  on  Labor  Unions, 

Trusts  and  Socialism. 

CHAPTER  XVII. 

NATURAL  TAXATION. 

APPENDIX. 


CHAPTER  I. 
INTRODUCTORY. 

QUESTIONS  FOR  THE  POLITICAL  ECONOMIST  TO 

ANSWER. 

WHEN  the  real  explanation  of  any  puzzling  phe- 
nomenon in  nature  is  discovered,  it  is  gener- 
ally found  to  be  simple  and  easily  understood.  This 
does  not  always  insure  an  immediate  admission  of 
the  truth,  however  clear  and  easy  of  proof  the  expla- 
nation may  be.  The  mind  will  not  act  impartially, 
when  biased  by  previously  conceived  ideas,  or  by 
long  training  in  the  accepted  canons  of  any  art,  or 
when  warped  by  self-interest. 

The  phenomena  of  the  sail  of  a  ship  being  seen 
before  the  hull,  of  day  following  night,  and  of  planets 
changing  their  places  in  the  sky,  were  studied  by 
astronomers  for  centuries  before  the  simple  expla- 
nation was  advanced  that  the  earth  is  round,  turns 
on  its  axis,  and  revolves  about  the  sun.  Yet  for 
many  years  afterwards  this  theory  was  disputed  in 
all  the  great  institutions  of  learning  in  the  world. 
Its  very  simplicity,  as  well  as  the  powerful  influence 
of  ecclesiastics,  Protestant  and  Catholic  alike,  re- 


2  The  Problem  of  the  Unemployed 

tarded  its  acceptance;  but  finally,  from  the  teach- 
ings of  Copernicus,  Galileo,  Kepler  and  Newton,  the 
beautiful  theory  of  the  solar  system  was  made  the 
basis  of  an  exact  science  in  place  of  the  jargon  which 
had  been  solemnly  expounded  as  astronomy  since  the 
days  of  Ptolemy. 

And  so  as  to  the  new  system  of  political  economy. 
It  is  possible  that  an  underlying  cause,  controlling 
the  distribution  of  wealth  and  accounting  for  socio- 
logical phenomena  which  have  heretofore  baffled 
philanthropists  and  statesmen,  has  at  last  been  dis- 
covered, and  that  from  it  has  been  evolved  a  system 
of  political  economy  as  simple  and  yet  as  compre- 
hensive as  the  science  which  explains  the  movements 
of  the  stars. 

Wealth  in  a  civilized  community  is  always  pro- 
duced by  a  combination  of  land,  capital  and  labor. 
Land  furnishes  the  material,  capital  the  machinery, 
and  labor  does  the  work,  including  the  work  of  plan- 
ning and  superintending.  Under  normal  conditions, 
wealth,  when  produced,  is  divided  among  the  fac- 
tors entering  into  its  production,  a  portion  of  it 
going  to  land  as  rent,  another  to  capital  as  interest, 
and  the  remainder  to  labor  as  wages,  the  latter  in- 
cluding compensation  for  superintendence  and  also 
for  direction  of  the  use  of  capital,  a  service  which  is 
often  performed  by  the  owner  of  the  capital  em- 
ployed. 

Land  and  rent,  capital  and  interest,  labor  and 
wages  are  the  primary  factors  to  be  taken  into  ac- 
count in  the  study  of  the  science  of  political  econ- 
omy. Properly  defined  from  an  economic  standpoint 
these  factors  are  all  that  need  be  considered  in  as- 
certaining the  laws  which  control  the  production  of 


Questions  to  Be  Answered  3 

wealth  and  fix  the  ratio  of  its  distribution  among 
land  owners,  capitalists  and  laborers.  If  political 
economy  is  a  science,  it  will  not  only  explain  and 
account  for  the  most  important  of  sociological  phe- 
nomena but  it  will  also  show  the  bearing  of  exist- 
ing laws  upon  such  phenomena,  and  the  effect  of 
legislative  changes  which  a  comprehensive  grasp  of 
the  science  may  suggest. 

Legislation  must  be  viewed  by  the  political  econ- 
omist from  a  cold  and  purely  scientific  point  of  view, 
without  reference  to  the  justice  or  the  injustice  of  it, 
but  solely  as  to  its  effect  upon  the  production  and 
distribution  of  wealth.  Questions  of  ethics,  of  com- 
pensation, of  equitable  distribution,  of  the  effect  of 
popular  prejudice  and  passion  in  applying  to  prac- 
tical politics  the  knowledge  obtained  from  the  study 
of  political  economy,  have  nothing  to  do  with  the 
science  itself.  Such  questions  are  for  the  moralist 
and  the  statesman,  not  for  the  student  of  economic 
science.  His  work  should  neither  be  embarrassed 
nor  confused  by  considerations  relating  to  them. 
Neither  should  his  judgment  be  biased  by  interest 
in  any  so-called  reform  or  by  prejudice  in  favor  of 
what  future  generations  may  perhaps  regard  as  time 
honored  wrongs.* 

It  is  possible  that  economic  science  may  point  with 
unerring  certainty  to  the  necessity  of  changes  in  leg- 

*Tlie  author  while  agreeing  in  the  main  with  the  majority 
of  those  to  whom  he  refers  as  political  economists  of  the  new 
school,  disclaims  any  attempt  to  reflect  the  views  commonly 
accepted  by  them.  Those  of  this  school  who  may  be  disposed 
to  criticize  some  of  his  positions  are  reminded  that  the  object 
of  this  work,  as  stated  on  the  title  page,  is  simply  to  show, 
from  the  cold  standpoint  of  science,  the  underlying  cause 
of  involuntary  idleness  and  the  failure  of  wages  to  keep  pace 
with  the  increasing  wealth-producing  power  of  wage  earners. 


4  The  Problem  of  the  Unemployed 

islation  in  the  interest  of  an  overwhelming  majority 
of  people,  modifying  to  some  extent  now  accepted 
rights  of  property  and  affecting  the  distribution  of 
wealth ;  but  even  so,  the  timid  conservative  need  not 
be  alarmed  on  this  account,  nor  should  he  for  this 
reason  shrink  from  a  thorough  investigation  of  one 
of  the  most  important  and  interesting  subjects  of 
human  thought.  As  has  ever  been  the  case  in  the 
progress  of  the  race  toward  improved  social  condi- 
tions, such  changes  as  may  be  found  desirable  will 
come  slowly,  periods  of  reaction  following  those  of 
action,  and  the  losses,  if  any,  accompanying  unavoid- 
able readjustments  of  economic  conditions  will  nec- 
essarily be  largely  diffused  among  all. 

It  is  generally  claimed,  whether  true  or  not,  that 
wages  do  not  keep  pace  with  the  wealth  producing 
power  of  the  laborer.  And  not  only  so,  but  that  the 
disproportion  between  the  total  amount  of  wealth 
produced  and  the  portion  of  it  going  to  labor  as 
wages  is  becoming  more  and  more  marked,  as,  with 
accelerated  ratio,  labor-saving  inventions  increase 
and  multiply.  Wages  of  individual  members  of  the 
highly  skilled  class  of  workers  have  risen  and  are 
undoubtedly  higher  than  ever  before.  The  prizes 
offered  for  exceptional  ability  on  the  part  of  such 
workers  are  of  dazzling  magnificence,  and  the  law  of 
the  survival  of  the  fittest  gives  to  the  child  of  the 
poor,  when  highly  endowed  by  nature,  an  equal 
chance  with  the  child  of  the  rich  to  win  in  the  field 
of  mighty  enterprise.  The  lives  of  the  captains  of 
industry  and  the  self-made  men  of  America  tend  to 
prove  that  this  is  true.  Still,  as  is  always  the  case 
with  prizes,  while  all  may  have  equal  opportunity  to 
strive  for  them,  success  can  crown  the  efforts  only 


Questions  to  Be  Answered  5 

of  the  few.  As  to  the  overwhelming  majority,  labor- 
saving  processes  have  not  as  yet  relieved  them  from 
the  necessity  of  working  almost  as  hard  as  ever  be- 
fore for  a  bare  living,  nor  does  the  struggle  for  ex- 
istence appear  to  be  less  intense  or  the  fear  of  the 
loss  of  employment  less  disquieting  than  when  wheat 
was  cut  with  a  sickle  and  the  whir  of  the  bobbin  was 
heard  at  every  door. 

Is  the  failure  of  wages  to  advance  more  rapidly 
and  the  frequent  inability  of  laborers  to  find  employ- 
ment justly  attributable  to  the  faults  of  laborers 
themselves  ?  The  teeming  millions,  under  any  condi- 
tion of  society,  must  perform  the  manual  and  clerical 
work  of  the  world,  and  if  every  one  working  for 
stated  wages  were  to  become  a  Washington  in  hon- 
esty and  a  Franklin  in  ability  and  thrift,  is  it  clear 
that  the  demand  for  labor  would  increase  thereby? 
The  efficiency  of  the  laborer  and  the  amount  of 
wealth  produced  would  be  increased  ;  but  this  is  what 
labor-saving  appliances  have  already  accomplished 
and  what  they  bid  fair  to  accomplish  in  far  greater 
degree.  In  many  lines  of  employment  the  most  idle 
and  trifling  of  laborers,  with  the  aid  of  such  appli- 
ances, produce  wealth  in  far  greater  quantities  than 
was  possible  on  the  part  of  the  most  conscientious 
and  intelligent  fifty  years  ago.  Why  should  increased 
efficiency  of  all  laborers  through  improvements  in 
their  character  and  ability  any  more  increase  the 
demand  for  labor  and  the  wages  of  laborers  than 
increased  efficiency  produced  by  improvements  in 
labor-saving  appliances? 

Is  it  true  that,  as  population  increases,  the  wages 
of  the  poorest  paid  class  of  labor  naturally  tend  to 
fall  to  the  point  at  which  the  laborer  can  barely  sub- 


6  The  Problem  of  the  Unemployed 

sist,  and  that  the  wages  of  all  other  classes  tend  to 
fall  in  like  proportion  ?  If  this  is  the  case,  what  is 
the  reason  of  it?  It  would  be  natural  to  suppose 
that  the  more  wealth  the  working  class  produced, 
either  by  the  aid  of  labor-saving  machinery,  or  by 
working  more  hours  in  a  day,  or  by  greater  faith- 
fulness toward  employers,  the  higher  would  wages 
be  for  all.  Such,  however,  does  not  seem  to  be  the 
result.  The  impression  that  a  labor-saving  device, 
by  dispensing  with  the  work  of  laborers,  to  that  ex- 
tent reduces  the  demand  for  labor  and  the  wages  of 
the  laborer,  still  lurks  in  the  mind  of  the  working 
man;  and  improvements  in  machinery  which  in- 
crease his  capacity  to  produce  wealth  are  dreaded 
and  feared,  instead  of  welcomed  as  the  means  by 
which  his  burdens  can  be  lightened  and  his  hours  of 
leisure  increased. 

If  it  is  true  that  labor-saving  processes  do  not  in- 
crease wages  in  the  same  proportion  in  which  they 
increase  the  laborer's  ability  to  produce  wealth, 
where  does  the  increasing  difference  between  the 
wealth  which  he  produces  and  that  which  he  receives 
as  wages  go?  Who  gets  it,  and  what  becomes  of  it, 
and  what  is  the  law  which  controls  its  distribution  ? 

Mr.  Carroll  D.  Wright,  formerly  United  States 
Labor  Commissioner,  who  was  usually  able  to  prove- 
by  figures  that  social  conditions,  no  matter  how  bad, 
were  better  in  all  respects  than  ever  before,  states, 
in  "Practical  Sociology,"  that  the  census  of  1900 
showed  that  5  per  cent,  of  the  workers  of  the  United 
States  (about  1,250,000)  were  involuntarily  idle  all 
the  time.  Why  is  it  that  in  the  midst  of  unlimited 
opportunities  for  work  which  unused  lots  and  lands 
afford,  such  immense  numbers  of  men,  willing  to 


Questions  to  Be  Ansivered  7 

work  and  begging  for  work,  should  be  unable  to  ob- 
tain it? 

In  1880,  tenants  operated  25  per  cent,  of  the  farms 
in  the  United  States ;  in  1890,  28  per  cent. ;  in  1900, 
35  per  cent. ;  in  1910,  37  per  cent.  Is  it  necessary 
that  others  should  own  the  land  on  which  the  real 
farmer  toils,  or  that  the  number  of  land  owning 
working  farmers  in  America  should  steadily  decrease 
as  wealth  increases? 

The  census  shows'  that  the  average  amount  of 
wealth  in  the  United  States  in  1850  was  $308  for 
every  man,  woman  and  child,  while  in  1900  it  was 
$1,243,  and  in  1914  about  $1,800 — a  six  fold  increase. 
If  capital  and  labor  can  thus  produce  wealth  in  such 
immensely  increasing  quantities,  why  is  it  that  in  a 
free  and  enlightened  country  the  average  wages  of 
the  great  majority  of  wealth  producers  are  still  little 
more  than  barely  sufficient  for  the  support  of  life, 
while  many  men,  in  a  single  lifetime,  accumulate 
millions,  tens  of  millions,  and  even  hundreds  of  mil- 
lions of  dollars  ?  Mr.  Frank  A.  Fetter,  Professor  of 
Political  Economy  at  Cornell  University,  in  "Prin- 
ciples of  Economics,"  states  that  1  per  cent,  of  all  the 
families  in  the  United  States  own  more  wealth  than 
the  remaining  99  per  cent.  Shall  this  apparently  in- 
creasing inequality  in  the  distribution  of  the  wealth 
in  this  country  be  wholly  attributed  to  the  superior 
virtues  of  men  of  the  class  of  Rockefeller,  Schwab 
and  Carnegie,  or  to  the  maladministration  of  the 
forces  of  government?  And  if  to  the  latter,  in  part 
at  least,  in  what  respects  are  the  powers  of  govern- 
ment maladministered? 

In  England  today,  where  wages  are  higher  than  in 
most  of  the  countries  of  Europe,  and  where  labor- 


8  The  Problem  of  the  Unemployed 

saving  appliances  are  utilized  to  the  fullest  extent, 
it  is  claimed  that  one-fifth  of  the  population  is  "con- 
demned to  a  poverty  which  destroys  them  physically 
and  spiritually,  *  *  *  they  do  not  have  enough  to  eat, 
are  inadequately  clothed,  sheltered  and  warmed  in  a 
rigorous  climate,  and  are  doomed  to  a  moral  degen- 
eracy which  puts  them  lower  than  the  savages  in 
cleanliness  and  decency."    Commenting  on  this  state- 
ment from  the  "People  of  the  Abyss,"  by  Jack  Lon- 
don, and  referring  to  the  fact  that  Mr.  London's  con- 
clusions are  supported  by  those  of  Mr.  Charles  Booth, 
Mr.  B.  S.  Rountree  and  others  who  have  investigated 
the  matter.  The  Public,  published  in  Chicago,  says : 
"College  settlements,  missions,  charities  and 
what  not  can  make  no  perceptible  impression 
on  the  rising  tide  of  poverty  accompanying  in- 
crease of  population  and  produced  by  an  arti- 
ficial scarcity  of  land.    *In  the  nature  of  things,' 
says  Mr.  London,  'they  cannot  be  but  failures. 
They  are  wrongly  though  sincerely  conceived. 
They  approach  life  through  a  misunderstanding 
of  life,  these  good  folks.  *  *  *  The  very  money 
they  dribble  out  in  their  child's    schemes    has 
been  wrung  from  the  poor.'     Shall  thrift  be 
preached?      'It  is  sheer  nonsense,'  he  replies, 
'to  preach  thrift  to  the  one  million  eight  hundred 
thousand  London  workers  who  are  divided  into 
families  which  have  a  total  income  of  less  than . 
$5.25  per  week,  one-quarter  to  one-half  of  which 
must  be  paid  for  rent.'  " 
We  seem  to  be  approaching  similar  conditions  in 
the  United  States.     Thus,  a  correspondent  of  The 
Outlook,    after   describing   the   dreadful   homes    in 
which  the  striking  packing-house  employes  of  Chi- 
cago were  living,  says : 

"  'I  have  never  had  a  child  come  to  me  for 
treatment,'  said  a  local  doctor,  'who  has  not  had 


Questions  to  Be  Atiswered  9 

enlarged  glands  of  the  neck.  These  glands  are 
meant  to  absorb  poisonous  matter.  These  little 
children  live  in  homes  so  foul  and  overcrowded, 
they  take  in  so  much  poison  that  their  glands 
are  overworked.  They  suffer,  too,  from  under- 
feeding, and  hence  anaemia.  In  the  blood  of  a 
healthy  person,  the  "count"  should  be  between 
85  and  95.  Among  my  patients,  I  rejoice  at 
finding  the  count  of  50.  I  have  found  it  as  low 
as  28.' 

"In  such  homes,  it  is  hard  for  family  life  to 
keep  wholesom.e  and  pure.  'Any  man  who  has 
a  family  of  little  children  here,'  said  a  Polish 
doctor,  'simply  cannot  keep  it  alive  on  the  un- 
American  wage  of  six  or  seven  dollars  a  week, 
especially  since  the  cost  of  living  is  rising  so 
high.  To  keep  the  home  alive  on  such  a  wage, 
the  mother,  too,  must  work  in  the  yards,  and 
sometimes  she  not  only  works  by  day,  but  comes 
home  at  night  to  cook  for  the  six  boarders  v-^ho 
are  crowded  with  the  family  into  the  small  four 
or  five  room  flat.  V/ith  no  money  for  wholesome 
recreation,  and  with  the  home  so  overcrowded 
with  boarders,  it  is  natural  enough  that  drink- 
ing is  so  heavy,  and  that  in  many  cases  immi- 
grant wives  and  daughters  grow  inured  to  sex- 
ual immorality — or  rather  unmorality.'  The 
moral  is — don't  have  families." 

The  late  Thorold  Rogers,  professor  of  political 
economy  of  Oxford  University,  and  for  many  years 
a  member  of  parliament,  in  his  "Six  Centuries  of 
Work  and  Wages,"  shows  that  the  golden  age  of  the 
English  workingman  as  regards  wages  was  back  in 
the  fifteenth  century,  500  years  ago,  when  he  re- 
ceived the  equivalent  of  the  carcass  of  a  sheep  for  a 
day's  work  of  eight  hours.  The  eight-hour  day  was 
then  universal ;  paupers  were  unknown,  and  such  a 
thing  as  an  able-bodied  man  wanting  work  and  un- 


10  The  Problem  of  the  Unemployed 

able  to  find  work  was  unheard  of  in  England.  Now 
8  per  cent  of  its  population  in  normal  times  are 
paupers,  and  over  one-fifth  of  its  people  do  not  have 
enough  to  eat  and  are  insufficiently  warmed,  clothed 
and  sheltered.  Yet  food,  fuel,  clothing  and  shelter 
can  be  produced  in  greater  abundance  now  and  with 
far  less  expenditure  of  human  labor  than  ever  before. 

In  the  fifteenth  century  a  man  could  spin  five 
hanks  of  twist  in  a  week;  today  a  man  and  a  boy 
spin  one  thousand  hanks  in  the  same  length  of  time. 
Wheat  was  garnered  with  a  sickle  and  threshed  with 
a  flail;  now  the  reaper  and  the  threshing  machine 
increase  the  output  of  harvest  hands  twenty  fold. 
Nails  were  then  forged  by  blacksmiths  one  by  one; 
now  they  are  so  cheap  that  carpenters  can  not  afford 
to  pick  them  up  when  dropped.  And  so  in  hundreds 
of  other  instances  labor  saving  appliances  have  in- 
creased in  like  degree  the  efficiency  of  labor  as  well 
as  the  ease  and  rapidity  with  which  the  necessities, 
comforts  and  luxuries  of  life  can  be  produced. 

But  inventions  which  save  labor  have  not  as  yet 
saved  the  laborer.  They  have  not  as  yet  made  it 
easier  for  him  to  obtain  the  primary  necessities  of 
life.  His  children,  often  denied  the  child's  birth- 
right to  play  in  the  sunshine  and  under  the  green 
trees,  by  the  millions  toil  long  and  dreary  hours  in 
mines  and  factories,  his  women  folks,  in  constantly 
increasing  numbers,  compete  with  men  for  work 
which  men  alone  should  do.  And  the  employer,  no 
matter  how  kindly  disposed,  can  seldom  afford  to  pay 
higher  wages.  He,  too,  has  to  stand  the  pressure 
of  the  upper  and  nether  millstones  of  our  murderous 
industrial  system,  which  grind  alike  the  average  em- 
ployer and  the  average  employe.    And  so  progress  in 


Questions  to  Be  Ansivered  11 

the  industrial  arts  as  to  multitudes  of  average  men 
is  now  a  hollow  mockery  if  not  a  blighting  curse.  As 
to  them,  inventions  have  not  lessened  the  intensity 
of  the  struggle  for  existence.  They  are  the  victims, 
not  the  beneficiaries,  of  steam  and  electricity,  the 
mighty  forces  of  nature  tamed  by  man  and  now  often 
used  in  the  enslavement  of  fellow  man. 

We  are  always  suffering  chronic  dull  times ;  duller 
some  times  than  at  other  times,  but  more  or  less  dull 
all  the  time.  We  grow  too  much  cotton,  though  mil- 
lions of  people  are  insufficiently  clothed.  We  pro- 
duce too  much  food,  though  half  the  population  of 
the  world  is  insufficiently  fed — shoemakers  wanting 
work  and  millions  wanting  shoes.  And  so  in  every 
line  of  industry  men  are  out  of  work,  while  other  men 
need  the  products  of  their  work,  which  products  they 
would  freely  buy  but  for  their  own  involuntary  idle- 
ness. Why  this  constant  derangement  and  clogging 
of  the  wheels  of  industry?  What,  if  any,  are  the 
obstacles  to  steady  employment  for  all  who  want 
steady  employment? 

Why  do  not  the  rewards  of  labor,  both  as  to  the 
average  employer  and  the  average  employe,  keep 
pace  with  constantly  accelerating  progress  in  the 
arts  and  sciences? 

Why  are  men  willing  to  work  so  often  unable  to 
find  work,  and  this,  too,  in  the  midst  of  abundant 
unused  natural  opportunities  for  work? 

Why  is  it  that  in  every  great  and  populous  center 
of  wealth  and  civilization  a  submerged  class  is  found 
whose  condition,  as  was  stated  by  Huxley,  is  more 
deplorable  than  that  of  man-eating  South  Sea  Island 
savages  ? 


12  The  Problem  of  the  Unemployed 

Is  it  not  probable  that  the  evils  referred  to  in 
these  questions  are  caused  by  an  improper  applica- 
tion of  the  forces  of  government,  and  might  they  not 
disappear  if  these  forces  were  understood  and  prop- 
erly applied? 

Is  it  not  true  that  our  social  as  well  as  our  physical 
relations  are  controlled  by  natural  laws?  If  so,  does 
legislation  in  harmony  with  the  natural  law  tend 
toward  individualism  and  freedom,  or  toward  social- 
ism and  slavery? 

In  an  age  in  which  the  phenomena  of  the  physical 
universe  are  studied  with  great  eagerness  and  suc- 
cess, the  indifference  everywhere  shown  to  a  knowl- 
edge of  the  laws  which  control  the  social  relations 
of  men  to  one  another  and  the  earth  on  v/hich  all 
must  live  is  a  remarkable  psychological  fact.  Hov/ 
strange  that  we  should  be  more  interested  in  the 
movements  of  stars  than  in  knowing  the  cause  of 
appalling  want  in  the  midst  of  constantly  increasing 
plenty.  When  strikes,  lockouts,  boycotts  and  the 
hatred  and  passions  engendered  by  the  present 
wasteful  system  of  industrial  warfare  shall  have 
passed  away,  what  then? 

Why  is  it  that  so  few  sociological  experts  attempt 
to  answer,  even  in  their  own  minds,  the  questions 
propounded  in  this  chapter?  Is  it  because  the  ques-  ' 
tions  are  uninteresting?  Is  it  because  they  do  not 
pertain  to  the  science  of  political  economy?  How 
can  political  economy  be  other  than  a  dull  and  profit- 
less study  if  questions  within  its  scope,  vitally  af- 
fecting the  well  being  of  mankind,  are  ignored  ? 


XOTE: — //  has  been  said  that  the  real  interest  of  this 
book  to  the  average  reader  begins  ivith  Chapter  VI,  page 
69.  The  person  who  is  nulling,  homever,  to  really  stndij 
the  science  of  political  economy  will  be  interested  in  this 
and  the  following  three  chapters. 


CHAPTER  II. 

DEFINITIONS  OF  WEALTH,  LAND,  CAPITAL  AND  LABOR ; 
AND  RENT,  INTEREST  AND  WAGES. 

DEFINITIONS  of  the  terms  used  in  the  study  of 
any  science  are  of  the  greatest  importance ; 
and,  as  is  often  the  case,  the  scientific  definition  is 
sometimes  more  and  sometimes  less  comprehensive 
than  the  popular  one.  This  is  especially  the  case  in 
political  economy,  since  its  terms  are  necessarily 
those  loosely  used  in  ordinary  conversation.  It  is  all 
important,  however,  that  the  definitions  given  should 
fit,  for  unless  the  term  employed  in  any  instance 
means  the  same  in  all  instances  of  like  character, 
clearness  either  of  thought  or  of  statement  is  impos- 
sible. Definitions  which  do  not  stand  this  test  must 
be  rejected.  It  is,  therefore,  first  in  order  to  define 
wealth  and  the  factors  which  control  its  production 
and  distribution.  The  distinction  between  these 
definitions  and  the  customary  meaning  of  the  words 
defined  must  always  be  borne  in  mind. 

WEALTH  is  any  material  thing  produced  by 
human  toil  which  gratifies  a  human  desire,  and  noth- 
ing can  be  regarded  as  wealth  in  an  economic  sense 
which  does  not  come  within  the  scope  of  this  defini- 
tion. Wealth  includes  food,  clothing,  buildings, 
machinery,  ships,  and  all  improvements  produced  by 
labor.    It  is  always  something  of  sea  or  land  which 


14  The  Prohlem  of  the  Unemployed 

has  been  molded,  or  fashioned,  or  transported,  by 
the  application  of  human  skill  and  industry.  It  does 
not  owe  its  existence  to  legal  enactments,  though  its 
price,  or  exchangeable  value,  may  be  enhanced,  im- 
paired or  destroyed  by  legislation,  yet  the  substance 
itself  constituting  wealth  can  never  be  blotted  out 
of  existence  by  the  mere  fiat  of  law.  A  book  is 
wealth,  as  defined  above,  but  not  the  copyright,  the 
existence  of  which  depends  upon  legislation,  and 
which  can  be  made  valueless  by  a  mere  legislative 
act.  The  copyright  is  a  special  privilege  conferred 
by  law,  and  while  the  repeal  of  this  privilege,  which 
means  the  repeal  of  the  right  to  dictate  the  terms  of 
publication  and  sale,  might  make  the  owner  of  the 
copyright  less  wealthy,  according  to  the  popular 
meaning  of  the  word,  the  amount  of  wealth  in  the 
world  would  not  be  affected  thereby.  This  is  also 
true  with  respect  to  patent  rights  and  all  other  spe- 
cial privileges  founded  on  governmental  law. 

The  mere  fact  that  a  thing  may  be  bought  and  sold, 
and  that  its  owner  may  obtain  wealth  in  exchange 
for  it,  does  not  bring  it  within  the  definition  of 
wealth.  Shares  of  stock  in  companies  and  corpora- 
tions do  not  constitute  wealth  as  here  defined.  A 
certificate  of  stock  simply  shows  that  the  holder  is 
the  owner  of  a  definite  undivided  interest  in  the' 
tangible  property  of  the  corporation  to  which  it  re- 
lates, and  in  the  special  privileges  which  the  corpo- 
ration may  enjoy.  So,  also,  bonds  and  promissory 
notes,  whether  secured  by  mortgages  or  not,  do  not 
come  within  the  definition  of  wealth.  They  are  but 
promises  to  repay  wealth  previously  borrowed.  In 
respect  to  them  as  well  as  to  stock  in  companies  and 
corporations,  the  location  of  the  tangible  wealth  to 


Definitions  15 

which  they  refer  may  be  thousands  of  miles  distant 
and  subject  to  the  jurisdiction  of  a  government 
foreign  to  that  under  which  the  owner  lives.  If  these 
evidences  of  ownership  and  promises  to  pay  were 
destroyed,  or  rendered  valueless  by  the  repeal  of 
special  privileges,  or  by  other  legislation,  the  amount 
of  real  wealth  in  the  world  would  not  be  thereby  les- 
sened one  iota.  The  things  to  which  they  refer  would 
still  remain  unchanged. 

Money  in  itself,  either  on  hand  or  in  bank  subject 
to  the  owner's  order,  is  not  wealth,  although  coin 
considered  as  bullion  is  wealth,  its  value  as  such  de- 
pending upon  its  weight  and  fineness.  Money  simply 
lepresents  commodities,  that  is  to  say,  wealth,  pre- 
viously exchanged  for  it,  and  for  which  it  can  at 
any  time  be  re-exchanged,  or  exchanged  for  other 
commodities  at  the  owner's  option.  Sound  money  is 
like  a  warehouse  receipt.  It  evidences  the  fact  that 
the  owner  of  the  money  has  in  effect  deposited  in  the 
great  warehouse  of  the  world,  commodities  of  a  cer- 
tain value,  for  which  he  has  been  given  a  receipt; 
that  on  presentation  of  this  receipt  in  the  world's 
clearing  house,  he  will  be  entitled  to  have  restored 
to  his  possession  the  articles  originally  given  in  ex- 
change for  it  (subject  to  fluctuations  in  prices)  or 
an  equivalent  in  other  commodities. 

It  is  possible  to  conceive  of  trade  and  exchange  of 
commodities  being  carried  on  without  money  or  any 
circulating  medium,  just  as  a  game  of  poker  or  any 
other  betting  game  can  be  played  without  money,  or 
emblems,  such  as  "chips,"  representing  the  amount 
of  the  stakes.  This  could  be  done  by  means  of  a  pos- 
sible, though  extremely  complicated  and  expensive, 
system  of  bookkeeping  conducted  by  a  bureau  of  the 


16  The  Problem  of  the  Unemployed 

government,  in  which  would  be  noted  A's  sales  to  B 
and  B's  to  C  and  C's  to  D  and  D's  to  A,  thus  closing 
the  circuit  and  cancelling  the  accounts  between  all 
parties  as  effectually  as  a  fifty  dollar  bill  passing 
from  one  to  the  other  might  do  it.  But,  as  in  the 
game  of  chance,  it  is  much  more  convenient  and  ex- 
peditious to  use  emblems  representing  the  amounts 
bet  than  to  note  them  down  in  writing,  so  in  carry- 
ing on  the  trade  of  the  world,  it  is  much  easier  and 
more  economical  to  use  tokens,  i.  e.,  money,  than  to 
resort  to  bookkeeping.  Money  in  fact  is  but  a  labor- 
saving  appliance  which  dispenses  with  the  vast 
amount  of  work  which  would  be  involved  in  the  bar- 
ter or  direct  exchange  of  commodities,  or  in  any  sys- 
tem of  bookkeeping  which  might  be  substituted  for 
it;  and  while  money  in  this  sense  is  doubtless  sus- 
ceptible of  improvement  in  matters  pertaining  to  its 
issuance  and  volume,  and  affecting  its  utility  as  the 
measure  of  values — improvement  which  would  save 
waste  and  increase  production — yet  all  this  would 
only  amount  to  a  saving  of  labor,  and  in  the  end 
would  have  no  more  effect  upon  the  production  and 
distribution  of  wealth  than  any  other  improvement 
in  a  labor-saving  device. 

To  have  a  clear  conception  of  the  laws  which  reg- 
ulate the  production  and  distribution  of  wealth,  one 
must  be  able  habitually  to  associate  sound  money 
with  tangible  things  and  commodities.  When  we 
say  that  a  man  has  ten  thousand  dollars  in  money, 
we  must  instantly  see  and  realize  that  what  he  in 
effect  really  owns  and  has  in  his  possession  consists 
of  two  thousand  barrels  of  flour  of  the  value  of  five 
dollars  a  barrel,  or  five  thousand  pairs  of  shoes  of 
the  value  of  two  dollars  a  pair,  or  ten  thousand  yards 


Definitions  17 

of  cloth  of  the  value  of  one  dollar  a  yard,  or  ten  thou- 
sand dollars  worth  of  any  of  the  things  to  be  found 
in  the  markets  of  the  world.  The  man  who  owns  the 
money  has  himself  in  effect  already  deposited  these 
identical  things  or  the  equivalent  of  them  in  the 
warehouse  of  the  world's  market,  just  as  he  may 
have  deposited  his  currency  or  gold  in  a  savings 
bank ;  and,  as  on  presentation  of  his  pass  book  to  the 
bank  he  can  draw  out  his  money  in  lots  to  suit,  so  on 
presentation  of  his  money  in  the  markets  of  the 
world,  he  can  draw  out  the  identical  commodities  pre- 
viously deposited  by  him,  or  others  of  equal  value, 
in  lots  to  suit. 

We  say,  for  instance,  that  Farmer  A  has  ten  thou- 
sand dollars  cash  in  hand  which  he  saved  in  ten 
years.  This  means  that  his  receipts  during  this 
period  exceeded  his  expenditures  by  ten  thousand 
dollars ;  or,  in  other  words,  that  the  value  of  his  de- 
posits of  wealth  in  the  markets  of  the  world  in  the 
form  of  wheat,  cattle,  vegetables,  etc.,  exceeded  his 
withdrawals  of  wealth  from  the  same  markets  in  the 
form  of  clothing,  groceries,  furniture,  implements, 
etc.,  by  ten  thousand  dollars.  It  means  that  at  the 
end  of  the  ten  years,  he  had  in  effect  remaining  to 
his  credit  in  the  great  world  warehouse,  a  portion  of 
the  cattle  and  things  which  he  had  previously  de- 
posited there,  and  that  this  remainder  was  of  the 
value  of  ten  thousand  dollars,  for  which  he  received 
from  the  world's  clearing  house  ten  thousand  dollars 
in  money.  The  money  simply  certified  that  he  was 
entitled  on  its  presentation  to  withdraw,  in  lots  to 
suit,  these  identical  commodities  left  by  him  in  this 
storehouse  and  resume  possession  of  them ;  or,  if  he 
so  preferred,  receive  the  equivalent  of  them  in  other 


18  The  Problem  of  the  Unemployed 

commodities.  While  the  wealth  which  the  day  la- 
borer or  the  mechanic  or  merchant  may  save  and 
accumulate  cannot  be  so  readily  traced  and  illus- 
trated as  that  saved  by  the  farmer,  the  process,  as 
will  readily  appear  on  reflection,  is  precisely  the 
same.  When  we  save  money  we  are  saving  the  things 
for  which  money  can  be  exchanged. 

Improvements  on  land  come  within  a  correct  def- 
inition of  wealth,  including  such  improvements  as 
result  from  the  artificial  fertilization  of  the  soil,  or 
the  breaking  of  the  prairie  sod,  or  the  clearing  away 
of  the  primeval  forest.  Wealth  does  not  include  coal 
beds  and  mineral  deposits,  but  it  does  include  im- 
provements used  in  connection  with  them  to  the 
extent  to  which  the  shaft,  the  tunnel  and  the  appli- 
ances for  reaching  and  bringing  to  the  surface  the 
coal  or  the  ore,  represent  the  application  of  human 
toil  and  skill.  Wealth  also  includes  domestic  ani- 
mals, since  human  labor  and  skill  to  a  greater  or  less 
extent  are  employed  in  raising  and  making  them 
useful  to  mankind. 

Wealth  in  the  sense  here  used  may  be  produced 
without  making  any  physical  change  in  the  object 
itself  to  which  it  relates.  This  is  effected  by  a  change 
in  its  position  or  in  its  relations  to  other  objects. 
One  hundred  bushels  of  wheat  in  the  hands  of  a 
farmer  in  the  West  is  worth,  say,  eighty  dollars.  By 
means  of  facilities  furnished  by  capital  and  the  ef- 
forts of  labor  applied  by  teamsters,  railroad  em- 
ployes, merchants,  brokers  and  others,  these  hun- 
dred bushels  of  wheat  are  transported  and  placed  in 
an  elevator  in  New  York  with  100,000  bushels  of 
other  wheat,  thus  reducing  the  cost  of  handling  it 
and  putting  it  in  closer  proximity  to  consumers.  This 


Definitions  19 

wheat  is  now  worth  a  hundred  dollars;  for,  by  thus 
changing  its  position,  wealth  of  the  value  of  twenty 
dollars  has  been  produced  and  added  to  it  just  as 
effectually  as  when,  by  the  application  of  capital  and 
labor  to  the  polishing  of  a  piece  of  furniture,  twenty 
dollars  may  be  added  to  its  value,  or  in  other  words, 
twenty  dollars  more  of  wealth  attached  to  it.  Addi- 
tional values  added  to  any  product  in  this  way  by 
changing  its  position  or  relation  to  other  things  has 
the  same  effect  on  the  production  and  distribution  of 
wealth  as  when  capital  and  labor  are  applied  to  mak- 
ing or  producing  the  thing  itself.  It  is  more  con- 
venient and  accurate,  however,  to  refer  to  the 
change  thus  made  as  additional  wealth  produced  and 
added  to  the  article  in  question  than  as  additional 
values  added  to  it. 

Wealth,  under  some  circumstances,  may  also  be 
produced  by  the  so-called  speculator  who  buys  sur- 
plus products  when  cheap  and  holds  them  for  a  fu- 
ture rise  in  prices,  provided  the  "cornering"  of  the 
market  is  not  attempted.  Thus,  the  buying  of  the 
farmer's  wheat  or  cotton  as  soon  as  it  is  raised,  and 
holding  it  with  the  expectation  of  its  advancing  in 
price  before  the  next  crop  matures,  tends  to  equalize 
prices  and  to  prevent  the  sale  of  products  at  abnor- 
mally low  prices  when  first  marketed,  and  the  waste 
thereby  resulting. 

In  general,  neither  land  nor  any  material  thing  as 
it  lies  untouched  in  the  great  storehouse  of  nature  is 
wealth,  but  it  becomes  wealth  after  it  has  been  oper- 
ated upon  and  placed,  by  the  hand  of  man,  in  a  posi- 
tion or  condition  in  which  it  can  minister  to  his 
wants  and  wishes.  This,  then,  is  a  correct  and  com- 
prehensive definition   of  wealth,  one  easily  under- 


20  The  Problem  of  the  Unemployed 

stood  and  applied,  and  which  means  the  same  thing 
under  all  circumstances,  viz :  Wealth  is  any  tangible 
thing  which  gratifies  human  desires,  the  raw  ma- 
terial of  which  comes  from  the  earth,  and  which 
owes  its  changed  condition  to  human  effort.  In  an 
economic  sense,  nothing  else  is  wealth.  It  is  to  those 
things  which  come  within  this  definition  of  wealth 
that  the  science  of  political  economy  applies. 

LAND  includes  all  material  things  which  do  not 
consist  of  wealth  as  defined  above.   Land  is  the  ma- 
terial on  which  and  out  of  which  wealth  is  produced. 
It  includes  all  the  raw  material  in  the  great  store- 
house of  nature,  which  has  been  furnished  for  the 
use  of  mankind.    Embracing  the  surface  of  the  earth, 
it  cannot  be  increased  or  decreased  to  the  extent  of 
a  single  square  yard.    Portions  of  the  earth's  surface 
covered  by  water,  for  instance,  may  be  drained  or 
filled  in,  and  wet  land  changed  into  dry  land,  but 
improvements  of  this  character  generally  constitute 
wealth  and  must  be  considered  separate  and  apart 
from  the  site  or  the  surface  of  the  earth  which  they 
occupy.     Land  includes  the  sites  on  which  the  rail- 
road tracks  and  terminals  are  constructed,  on  which 
farms  are  located,  and  dwelling-houses  and  factories 
are  built.    It  includes  the  coal  beds  and  the  mineral 
deposits  and  the  undomesticated  animals  of  land  and 
sea,  and  in  fact  all  the  products  of  the  earth  as  they 
lie  unused  and  untouched  by  the  hand  of  man. 

Wealth  is  not  only  produced  on  land  devoted  to 
agriculture,  but  it  is  also  actually  produced  in  far 
greater  quantities  on  land  devoted  to  commerce,  min- 
ing, manufacturing  and  to  other  business  purposes. 
As  already  shown  in  defining  wealth,  it  is  as  accurate 
to  say  that  the  wealth  of  the  world  is  increased  by  the 


Definitions  21 

work  of  merchants  and  brokers  as  that  it  is  increased 
by  the  work  of  farmers  and  mechanics.  The  city  lot 
on  Avhich  the  work  of  exchanging  commodities  is 
carried  on  is  as  much  devoted  to  the  production  of 
wealth  as  the  land  on  which  the  commodities  them- 
selves are  raised  or  manufactured.  Every  one  of  the 
acts  in  the  ordinary  course  of  business  by  which 
wheat,  for  instance,  is  transported  to  the  mill,  ground 
into  flour,  baked  into  bread,  and  placed  in  the  hands 
of  the  consumer,  adds  a  certain  amount  of  wealth  to 
it,  the  aggregate  of  which  usually  exceeds  by  many 
fold  the  value  of  the  original  product.  One  of  the 
most  important  acts  by  means  of  which  a  few  bushels 
of  wheat  in  the  hands  of  a  farmer  in  Iowa  are  finally 
exchanged  for  a  pair  of  shoes  in  the  hands  of  a  shoe- 
maker in  Massachusetts,  may  be  performed  by  a 
broker  in  an  ofRce  on  Wall  Street.  Wealth  thus  pro- 
duced and  added  to  the  wheat  by  this  broker  operat- 
ing on  land  in  Wall  Street  does  not  differ  in  effect  from 
the  wealth  produced  by  the  farmer  in  raising  the 
wheat  on  land  in  Iowa.  Owing  to  the  favorable  loca- 
tion of  Wall  Street  land  for  the  purpose,  great  num- 
bers of  such  exchanges  are  effected  upon  it  annually, 
involving  enormous  amounts  of  products  and  adding 
to  them  in  the  aggregate  enormous  sums  of  wealth. 
The  wealth  thus  actually  produced  on  a  single  city 
lot  may  exceed  the  wealth  produced  on  a  thousand 
farms  in  Iowa.  Men  will  pay  more  for  the  privilege 
of  producing  wealth  on  such  a  lot  than  the  value  of  a 
thousand  farms  in  Iowa,  since  a  lot  of  this  kind  often 
sells  without  reference  to  improvements  for  more 
than  the  price  of  a  thousand  farms.  Thus,  land  on 
Wall  Street,  exclusive  of  improvements  on  it,  has 
sold  at  the  rate  of  over  twelve  millions  of  dollars  per 


22  The  Problem  of  the  Unemvloyed 

acre,  many  an  acre  often  being  worth  more  than  a 
thousand  farms. 

It  is  thus  seen  that  the  importance  of  the  factor  of 
land  in  fixing  the  ratio  of  the  distribution  of  the 
products  of  labor  does  not  depend  upon  area  but  upon 
value ;  nor  does  it  lie  so  much  in  land  devoted  to  agri- 
culture as  in  land  devoted  to  business,  manufactur- 
ing, mining,  and  speculative  purposes,  including  rail- 
road rights  of  way  and  terminals,  the  aggregate 
value  of  all  of  which  in  the  United  States  is  now 
many  times  greater  than  that  of  all  lands  in  actual 
cultivation,  exclusive  of  improvements  on  them.  In 
Greater  New  York,  for  instance,  the  tax  assessment 
of  1914  shows  that  the  value  of  the  land  alone,  exclu- 
sive of  all  improvements  upon  it,  is  over  four  billion 
dollars.  It  is  estimated  that  the  land  values  of  that 
city  equal  the  land  values  of  all  the  land  in  crop  culti- 
vation west  of  the  Mississippi  river.  In  this  connec- 
tion it  is  interesting  to  note  that  buildings  and  im- 
provements on  land  in  New  York  City  are  assessed 
at  less  than  two  billion  dollars,  or  but  little  over  half 
as  much  as  the  land  alone. 

CAPITAL  is  wealth  used  to  produce  more  wealth. 
While  all  capital  is  wealth,  all  wealth  is  not  capital. 
It  is  not  difficult  to  draw  the  line  marking  the  differ- 
ence between  capital  and  wealth,  since  it  is  sufficient 
to  say  that  wealth  which  is  not  employed  in  the  pro- 
duction of  more  wealth  is  not  capital,  while  all  wealth 
thus  employed  is  capital.  An  axe  in  the  hand  of  a 
laborer  is  capital,  as  much  so  as  a  dredging  machine 
costing  a  hundred  thousand  dollars. 

Capital  includes  all  material  instrumentalities, 
however  simple  or  complex,  coming  within  the  defi- 
nition of  wealth,  which  are  used  in  the  production 


Definitio7is  23 

of  more  wealth.  Capital  is  something,  the  use  of 
which  saves  labor,  something  which  makes  labor 
more  effective  in  the  production  of  wealth.  It  is  in 
reality  stored  up  labor.  In  the  case  of  the  manufac- 
turer, his  machinery  and  the  buildings  in  which  it 
is  operated,  are  capital;  so  are  the  raw  materials 
and  manufactured  products  which  he  finds  it  expe- 
dient to  carry;  so  is  also  the  money  which  he  may 
have  on  hand,  according  to  the  definition  of  money 
already  given.  In  the  case  of  the  farmer,  capital 
includes  his  farm  buildings,  agricultural  implements 
and  livestock,  and  provender  and  food  carried  from 
one  harvest  to  another.  In  the  case  of  the  merchant, 
it  includes  his  stock  of  merchandise  and  the  building 
needed  for  his  business. 

Capital  is  always  wealth  in  the  form  of  some 
labor-saving  appliance,  or  wealth  so  used  as  to  save 
labor.  The  capital,  for  instance,  constituting  the 
merchant's  stock  of  goods,  is  used  as  effectually  in 
the  saving  of  labor  as  capital  in  the  form  of  any 
labor-saving  machine.  The  accumulation  at  a  place 
convenient  of  access  to  consumers  of  the  goods  con- 
stituting his  stock  in  trade  saves  the  enormous  waste 
of  labor  which  would  otherwise  be  involved  were 
the  producers  themselves  compelled  to  journey 
around,  seeking  purchasers  for  their  surplus  prod- 
ucts. Wealth  invested  in  a  building  to  house  a 
laborer  is  capital,  since  the  workman  cannot  work 
and  produce  wealth  without  the  protection  from  the 
elements  which  the  building  affords ;  hence  such  a 
building  is  wealth  used  to  produce  more  v/ealth. 

Capital  is  the  fund  from  which  wages  are  drawn,* 

♦Capital  being  the  product  of  labor,  and  in  effect  stored  up 
labor,  it  may  not  be  strictly  accurate  to  say  that  it  is  the  fund 


24  The  Problem  of  the  Unemployed 

and  since,  as  will  be  shown  later,  capital  is  in  effect 
stored  up  labor,  it  is  proper  and  convenient  to  refer 
to  the  capital  in  a  community  or  nation  as  the  wage 
fund  of  such  community  or  nation.  But  capital  can 
never  include  land,  and  no  consistent  or  logical  sys- 
tem of  political  economy  can  be  formulated  in  which 
land,  under  any  circumstances,  is  regarded  either  as 
capital  or  wealth. 

LABOR  is  work  performed  usually  with  the  aid  of 
capital  upon  raw  material  furnished  by  land,  by 
means  of  v/hich  wealth  is  produced.  Those  who  do 
this  work  are  divided  into  two  classes,  viz :  employ- 
ers and  employees,  the  employee,  however,  being 
often  his  own  employer.  Labor  is  human  effort, 
both  mental  and  physical,  applied  to  material  things 
for  the  purpose  of  producing  wealth.  When  such 
effort  is  applied  simply  for  the  purpose  of  acquiring 
v/ealth  produced  by  others,  it  is  not  labor  within  the 
economic  meaning  of  the  word,  nor  does  wealth  thus 
acquired  come  within  the  definition  of  wages.  Labor 
includes  Vv^ork  performed  upon  material  which  may 
have  already  become  wealth,  by  means  of  which  its 
value  is  increased  or,  in  other  words,  wealth  added 
to  it.  Labor  includes  the  work  of  the  brain  in  or- 
ganizing, inventing,  planning,  managing,  directing 
and  superintending,  as  well  as  that  of  the  muscle  in 
lifting  and  tugging.     It  includes  the  work  of  the 

from  which  wages  are  drawn.  This  objection,  however,  seems 
technical,  since  employees  as  a  class  cannot  wait  for  the  pay- 
ment of  wages  until  products  are  finished  and  placed  on  the 
market  and  sold.  Few  enterprises  could  be  carried  on  under 
modern  methods  but  for  the  previous  accumulation  of  capital 
from  which  the  employee  receives  his  wages  as  the  work  pro- 
gresses, although  he  in  effect  produces  in  advance  day  by  day 
the  wealth  afterward  given  him  in  exchange  for  his  labor. 


Definitions  25 

employer  as  well  as  the  work  of  the  employee,  and 
one  is  as  much  a  laborer  as  the  other. 

Since  any  kind  of  a  tool  is  capital,  it  is  perfectly 
accurate  to  limit  the  economic  sense  of  the  word 
"labor"  to  work  performed  with  the  aid  of  capital 
in  the  production  of  more  wealth.  While  it  is  also 
proper  to  limit  labor  to  work  which  produces  or 
increases  wealth,  this  limitation  does  not  exclude 
the  work  of  the  merchant  or  broker  or  any  other 
middle  man.  It  is  obvious  that  work  performed, 
for  instance,  in  manufacturing  wheat  into  flour, 
increases  the  amount  of  wealth  in  the  world,  and  is 
labor ;  and  on  reflection,  it  must  appear  equally  clear 
that  the  work  performed  by  the  merchant  or  broker 
in  selling  the  wheat  or  the  flour  adds  to  its  value  and 
in  effect  adds  wealth  to  it.  Labor  also  includes  the 
work  which  is  often  performed  by  the  owner  of  cap- 
ital in  managing  the  business  in  which  his  capital  is 
invested  and  in  planning  the  application  of  capital, 
by  means  of  which  he  is  enabled  to  enjoy  a  larger  in- 
come than  if,  like  other  capitalists,  he  simply  loaned 
capital  at  interest  to  some  one  else  who  would  per- 
form the  labor  involved  in  the  management  of  it. 
Even  the  exercise  of  judgment  and  discretion  on  the 
part  of  a  capitalist  in  buying  stock  in  a  wealth-pro- 
ducing company  or  corporation  may  often  come 
within  the  economic  definition  of  labor,  for  the  per- 
formance of  which  wages  are  paid. 

The  labor  of  employers,  in  the  management  and 
direction  of  capital  which  they  own  or  control,  is  as 
much  devoted  to  the  production  of  wealth  as  that  of 
mechanics  and  self-employing  farmers.  It  is  simply 
a  kind  of  skilled  labor.  Wages  received  for  service 
of  this  sort  are  often  much  higher  than  those  re- 


2G  The  Problem  of  the  Unemployed 

ceived  by  laborers  working  for  stated  sums.  Such 
wages,  however,  are  contingent  on  the  success  of 
enterprises.  If  losses  and  failures  could  be  estimated 
it  is  probable  that  the  average  wages  of  employers 
would  not  be  found  to  be  excessive,  as  compared  with 
those  of  employees. 

The  work  of  servants  who  simply  minister  to  the 
comfort  and  ease  of  employers  is  not  always  directly 
instrumental  in  the  production  of  tangible  things 
coming  within  the  definition  of  wealth,  and  is  not 
labor  in  the  economic  sense  of  the  word.  Neither  is 
work  performed  for  the  purpose  of  acquiring  wealth 
by  theft,  or  by  combinations  in  restraint  of  trade, 
or  by  means  of  special  privileges,  or  in  any  other 
manner  of  like  character,  labor  in  the  economic  sense 
of  the  word. 

ECONOMIC  RENT  is  what  is  paid  for  the  use  of 
land,  without  regard  to  improvements  on  it  or 
anything  done  to  make  it  available  for  use.  It  is 
what  capital  and  labor  pay  for  the  privilege  of  pro- 
ducing wealth  from  the  raw  material  of  nature, 
which  is  land,  as  previously  defined.  It  is  what  is 
paid  for  access  merely  to  the  storehouse  of  nature. 
Since  neither  capital  nor  labor  can  be  employed 
for  a  single  instant  without  the  use  of  land,  rent  may 
properly  be  considered  the  price  paid  for  the  oppor- 
tunity of  employment.  A  royalty  of  so  much  per  ton 
for  the  privilege  of  sinking  a  shaft  and  producing 
wealth  in  the  form  of  coal,  available  for  use,  is  eco- 
nomic rent  as  here  defined. 

Rent  may  be  paid  annually,  or  it  may  be  paid  in 
advance  in  the  form  of  purchase  money  expended 
for  land.  In  either  event,  it  is  what  is  paid  for  the 
privilege  of  access  to  land,  and  the  result  as  to  the 


Definitions  27 

production  and  distribution  of  wealth  is  the  same. 
This  is  also  true,  even  though  the  land  owner  and 
the  capitalist  and  the  laborer  be  united,  as  often 
happens,  in  the  same  person. 

Ground  rent,  as  known  in  England  and  subject  to 
which  most  of  the  buildings  in  the  cities  of  that 
country  have  been  constructed,  comes  within  the 
definition  of  rent.  There  is  a  wide  difference  be- 
tween the  economic  and  popular  meaning  of  the 
word  rent.  Rent  in  its  popular  meaning  includes 
what  is  paid  for  the  use  of  buildings  and  improve- 
ments as  well  as  what  is  paid  for  the  use  of  the  land 
on  which  they  are  located.  The  additional  income, 
however,  which  an  owner  obtains  on  account  of  im- 
provement on  the  land  is  not  economic  rent,  but 
interest  received  for  use  of  the  capital  which  such 
improvements  represent. 

Hence  in  the  case  of  improved  real  estate,  the  in- 
come which  the  owner  gets  from  it,  over  and  above 
interest  on  the  value  of  the  improvements  and  an 
allowance  for  renewals,  insurance  and  repairs,  is 
rent.  Thus,  suppose  the  improvements  consist  of 
a  building  worth  ten  thousand  dollars  and  that  in- 
terest on  an  investment  of  ten  thousand  dollars  at 
the  rate  percent  prevailing  in  the  locality  where  the 
property  is  situated,  together  with  the  cost  of  keeping 
the  building  insured  and  renewed,  amounts  to  a 
thousand  dollars  annually,  and  that  the  entire  prop- 
erty, including  the  land,  rents  for  two  thousand 
dollars  a  year.  There  is  thus  a  difference  of  about 
a  thousand  dollars  between  the  interest  on  the  ten 
thousand  dollar  improvement  plus  cost  of  insurance, 
repairs  and  renewals,  and  the  total  income  of  two 
thousand  dollars  received  from  the  property.    This 


28  The  Problem  of  the  Unemployed 

difference  is  what  the  owner  gets  for  the  use  of  the 
land  alone,  and  it  constitutes  the  rent  of  the  land 
according  to  the  meaning  of  the  word  as  used  in 
political  economy.  In  this  instance,  a  thousand 
dollars  is  annually  paid  for  access  to  the  land.  With 
increase  of  population,  the  income  from  this  prop- 
erty may  reach  four  thousand  dollars  a  year,  without 
the  expenditure  upon  it  of  any  additional  capital; 
if  so,  the  price  for  the  use  of  this  land  would  rise 
from  a  thousand  to  three  thousand  dollars  a  year. 

The  following  illustration  shows  what  rent  sig- 
nifies when  the  land  owner,  the  capitalist  and  the 
laborer  are  combined  in  the  same  person.  Suppose 
potatoes  are  grown  by  two  working  farmers  with- 
out assistance  from  other  laborers,  one  of  whom, 
Farmer  Near,  owns  the  land  nearer  the  city,  and 
the  other.  Farmer  Far,  owns  the  land  farther  away. 
Farmer  Near  raises  and  delivers  1,500  bushels,  for 
which  he  receives  $750.  Farmer  Far  works  just  as 
hard,  but  being  compelled  to  spend  much  of  his  time 
in  hauling  his  potatoes  nine  miles  farther  to  market, 
he  only  raises  and  delivers  a  thousand  bushels,  for 
Vv^hich  he  receives  but  $500.  Notwithstanding  the 
difference  in  the  incomes  of  these  two  farmers,  one 
receives  no  higher  wages  in  an  economic  sense  than 
the  other.  Each,  with  respect  to  the  potato-raising 
enterprise  in  which  he  is  engaged,  is  a  capitalist, 
a  landlord  and  a  laborer.  Both  have  probably  about 
the  same  amount  of  capital  represented  by  buildings, 
tools  and  teams,  but  Farmer  Near's  interest  as  a 
landlord  is  much  greater  than  Farmer  Far's,  his 
land  being  worth,  perhaps,  many  times  as  much  as 
that  of  Farmer  Far's.  The  difference  in  the  incomes 
is  not  a  difference  in  wages,  but  results  solely  from 


Definitions  29 

the  fact  that  Farmer  Far  receives  in  effect  $250 
more  rent  per  annum  from  his  land  than  Farmer 
Far  receives  from  his. 

INTEREST  is  what  is  paid  for  the  use  of  wealth. 

WAGES  is  what  is  paid  for  service  rendered  by 
labor  in  producing  or  attempting  to  produce  wealth. 
Interest  is  the  share  of  the  product  going  to  capital ; 
wages  is  the  share  going  to  labor.  In  an  economic 
sense,  wages  includes  profits,  since  the  word  profit 
in  popular  parlance  means  interest  on  a  compara- 
tively small  capital  plus  the  wages  of  an  employer 
or  highly  skilled  laborer.  Thus,  a  man  of  more 
than  ordinary  ability,  by  the  use  of  say,  ten  thousand 
dollars  of  capital  in  some  wealth-producing  enter- 
prise, may  secure  an  income  of  ten  thousand  dollars 
a  year;  but  the  principal  factor  which  brings  about 
such  a  result  is  not  his  capital  of  ten  thousand 
dollars,  but  its  combination  with  his  mental  effort, 
or,  in  other  words,  highly  skilled  labor,  as  heretofore 
referred  to.  Wages,  in  an  economic  sense,  is  what 
he  receives  over  and  above  interest  at  the  prevailing 
rate  on  the  ten  thousand  dollars  of  capital.  Say  five 
hundred  dollars  a  year  be  deducted  for  interest,  then 
there  would  be  left  nine  thousand  five  hundred  dol- 
lars for  wages,  it  being  assumed  that  no  part  of  the 
income  is  from  rent  or  from  the  fruits  of  monopoly 
or  special  privileges,  as  will  be  hereafter  explained. 
This  sum  of  nine  thousand  five  hundred  dollars  a 
year  for  wages  may  be  excessive ;  if  so,  it  must  never- 
theless be  regarded  simply  as  high  wages  paid  for 
skilled  service.  The  fact  that  such  services  may 
be  overpaid,  that  the  merchant,  the  broker  or  the 
manufacturer  may  receive  as  wages  in  payment  for 
his  services  more  of  the  wealth  produced  than  he 


30  The  Problem  of  the  Unemployed 

would  get  under  a  less  wasteful  system  of  produc- 
tion and  distribution,  say,  one  founded  in  part  on 
voluntary  co-operation,  does  not  require  the  crea- 
tion of  any  additional  term  to  fit  the  case. 

Wages  and  profit,  therefore,  in  an  economic 
sense,  are  often  synonymous  terms,  and  because  both 
represent  the  share  of  wealth  which  goes  to  labor, 
it  is  immaterial  whether  the  portion  which  labor 
receives  as  its  share  is  called  wages  or  profit;  the 
result,  so  far  as  the  other  portion  which  goes  to  land 
is  concerned,  is  the  same.  Since  labor  covers  every 
character  of  service  instrumental  in  the  production 
of  wealth,  wages  is  a  term  broad  enough  to  include 
the  entire  product  of  any  wealth-producing  enter- 
prise which  does  not  go  to  capital  as  interest,  or  to 
land  as  rent,  and  the  word  rent  is  broad  enough  to 
include  all  which  goes  to  land.  To  attempt  to  draw 
additional  distinctions  and  subdivisions  would  only 
result  in  needless  confusion  of  thought. 

Wages  includes  not  only  the  salary  of  the  bank 
president  and  the  per  diem  stipend  of  the  hod  car- 
rier, but  also  all  of  any  person's  income  from  any 
wealth-producing  enterprise  followed  by  him,  no 
matter  how  great  such  income  may  be,  which  is  not 
attributable  to  rent  and  interest,  and  not  within  the 
exceptions  hereafter  referred  to.  By  a  wealth-pro- 
ducing enterprise,  however,  is  meant  one  which  actu- 
ally increases  the  wealth  of  the  world,  and  not  one 
which  merely  draws  to  those  interested  in  it  wealth 
produced  by  others. 

To  summarize:  Wealth  is  a  tangible  thing  pro- 
duced by  human  labor,  which  gratifies  a  human  de- 
sire; land  furnishes  the  material  from  which  and 
the  place  on  which  wealth  is  produced;  capital  fur- 


Definitio7is  31 

nishes  the  machinery  and  labor  does  the  work ;  rent 
is  the  portion  of  the  product  which  goes  to  land, 
interest  the  portion  which  goes  to  capital,  and  wages 
the  portion  which  goes  to  labor.  The  portion  of  the 
product  sometimes  diverted  by  combinations  in  re- 
straint of  trade,  and  various  forms  of  special  privi- 
lege, comes  within  exceptions  to  the  general  rule. 
Such  exceptions,  while  reducing  the  amount  to  be 
distributed,  do  not  affect  the  ratio  of  the  distribu- 
tions among  the  factors  of  production. 


CHAPTER  III. 

THE  NATURE  OF  INTEREST. 

THE  causes  which  affect  rent,  interest  and  wages 
can  be  traced  under  the  most  simple  as  well  as 
the  most  complex  conditions  of  society.  To  illustrate 
this,  let  it  be  assumed  that  from  the  dawn  of  civiliza- 
tion, personal  rights  were  safeguarded  by  custom 
and  law,  and  that,  under  such  conditions,  the  primi- 
tive man,  naked  and  with  no  tool  or  implement, 
v/aded  into  the  sea  and  dug  clams  with  his  unaided 
hands.  Clams  became  wealth  as  soon  as  detached 
from  land.  Once  in  his  hands,  a  clam  was  a  tangible 
thing  produced  by  human  effort  which  gratified  a 
human  desire.  It  was  wealth  according  to  the 
economic  definition  of  the  word.  Here  labor  was 
applied  to  land,  but  the  factor  of  capital  was  missing. 
Wages  absorbed  the  entire  product,  none  of  the  clams 
being  given  to  any  landlord  as  rent  nor  to  any  cap- 
italist as  interest. 

Let  it  be  assumed  that  capital  first  appears  in  the 
form  of  a  labor-saving  device  with  which  to  move 
the  sand  which  covers  the  clams,  some  one,  after 
months  of  toil  with  sharply  pointed  stones,  having 
made  a  wooden  shovel,  by  means  of  which  twice  as 
many  clams  can  be  produced  in  a  given  time.  After 
shovels  have  come  into  general  use,  there  will  still  be 
people  in  the  community,  including  the  young  just 
old  enough  to  work  and  others  too  ignorant  or  too 
shiftless  to  make  shovels  for  themselves,  who  will 


The  Nature  of  Interest  33 

nevertheless  want  to  use  them.  One  of  this  class 
naturally  tries  to  borrow  a  shovel,  and  perhaps 
expects  to  get  the  use  of  it  for  nothing.  The  owner, 
however,  thinking  of  the  self-denial  practiced  in 
making  the  shovel,  refuses  to  surrender  the  use  of 
it  without  compensation;  and  justly  so,  since  to  give 
gratuitously  the  use  of  a  thing  confers  as  great  a 
benefit  as  the  giving  the  thing  itself.  He  therefore 
demands  for  its  use  one-fourth  of  the  clams  gathered 
with  it.  The  borrower,  knowing  that  he  can  pay  this 
and  still  have  more  clams  as  the  net  fruits  of  his  la- 
bor than  if  he  gathered  them  without  using  a  shovel, 
agrees  to  these  terms,  and  in  doing  so  he  in  effect  con- 
sents to  the  payment  of  this  rate  of  interest.  The 
product,  the  clams  constituting  the  wealth  produced, 
will  now  be  divided  between  capital  and  labor.  Cap- 
ital gets  one-fourth  as  interest,  and  labor  the  other 
three-fourths  as  wages,  none  of  the  product,  however, 
going  to  land  as  rent.  The  arrangement  is  mutually 
beneficial.  The  tool  maker  is  rewarded  for  his  indus- 
try and  self-denial,  and  stimulated  to  renewed  activ- 
ity in  making  shovels,  while  the  laborer,  by  the  aid 
of  capital,  makes  higher  wages  than  would  be  possi- 
ble without  it.  This  might  not  be  the  case,  however, 
if  land  received  a  portion  of  the  product  as  rent. 
But  the  landlord  has  not  yet  appeared. 

Another  industrious  member  of  this  primitive 
community  builds  for  himself  a  house.  Others  who 
would  like  to  live  in  houses  like  it  are  unwilling  to 
practice  the  industry  and  economy  involved  in  build- 
ing them.  This  class,  as  also  the  juniors  just  becom- 
ing of  adult  age,  will  remain  without  the  ownership 
of  such  houses  after  others  in  the  community  have 
supplied  themselves  with  them.     A  house,  like  any 


34  The  Problem  of  the  Unemjjloyed 

other  kind  of  capital,  is  also  a  labor-saving  device, 
and  is  useful  in  the  production  of  wealth.  It  is  located 
near  a  spring  of  water,  and  convenient  to  the  sources 
from  which  food  can  be  obtained,  and  thus  saves  the 
labor  and  time  involved  in  seeking  a  distant  cave  or 
hollow  tree  for  protection  from  the  storms.     The 
warmth  and  shelter  and  opportunity  for  rest  and 
recuperation  which  it  affords  enables  its  occupant  to 
work  to  greater  advantage  and  produce  more  wealth, 
and  thus  make  higher  wages  than  would  be  possible 
without  it.    After  the  industrious  and  thrifty  have 
supplied  themselves  with  houses,   why  should   one 
already  owning  his  own  house  exert  himself  to  obtain 
a  surplus  house  which  he  cannot  use  and  for  which 
the  homeless  ones  have  nothing  to  give  in  exchange  ? 
What  is  the  motive  for  further  industry  and  self- 
denial  on  his  part  in  the  house  producing  line?  With- 
out a  motive  for  exertion,  and  a  strong  one,  too,  he 
will  cease  to  be  industrious  and  frugal.    It  is  absurd 
to  suppose  that  he  will  continue  to  toil  and  sweat  in 
the  production  of  houses  which  cannot  be  sold,  unless 
he  is  to  receive  compensation  for  his  labor  in  some 
other  way.     To  give  one  the  free  use  of  a  house  or 
shovel,  or  the  free  use  of  any  other  article  of  wealth, 
is  equivalent  to  donating  to  another  the  product  of 
one's  own  labor,  and  placing  the  idler  and  the  spend- 
thrift on  an  equal  footing  with  the  industrious  and 
the  capable.    The  owner  of  the  surplus  house,  there- 
fore, charges  a  price  for  the  use  of  it.     This  price 
the  non-owner  gladly  pays,  if  for  no  other  reason 
than  that  the  use  of  the  house  enables  him  to  produce 
more  wealth  and  retain  a  greater  portion  of  it  as 
wages,  just  as  in  the  case  of  borrowing  the  shovel. 
What  the  owner  of  the  house  receives  for  its  use  is 


The  Nature  of  Interest  35 

interest  on  the  capital  invested  in  building  it,  noth- 
ing being  received  as  rent,  in  the  economic  sense  of 
the  word,  since  nothing  is  received  for  the  use  of  the 
land  on  which  the  house  stands.  This  is  because  land 
as  yet  is  free.  It  is  still  unlimited  in  quantity  in 
proportion  to  population,  there  being  no  greater 
demand  for  one  site  than  for  another.  Hence  it 
seems  to  be  as  natural  and  as  equitable  to  pay  for  the 
use  of  a  thing  as  to  pay  for  the  thing  itself,  and  this 
is  what  interest  amounts  to. 

Again,  suppose  by  some  accident  it  is  next  discov- 
ered that  aerolites  can,  by  long  and  tedious  grinding, 
be  fashioned  into  axes,  and  that  one  man  with  the 
aid  of  such  an  ax  can  do  the  work  of  twenty  men 
without  it  in  making  useful  articles ;  also  that  on  an 
average  it  takes  a  man  three  hundred  days  to  make 
an  ax.  Will  the  possessor  of  an  instrument  of  this 
kind,  in  the  production  of  which  so  much  patient 
industry  has  been  expended,  yield  the  use  of  it  to 
another  for  nothing?  Will  he  thus  give  him  the 
benefit  gratuitously  of  the  three  hundred  days  of 
labor  which  have  been  accumulated  and  stored  in  the 
ax,  representing  as  it  does  months  of  weary  toil,  and 
the  practice,  perhaps,  of  the  most  rigid  economy  in 
living  expenses?  Assuredly  not.  Otherwise,  altru- 
ism would  mean  making  a  slave  of  one's  self  for  the 
benefit  of  the  idle,  the  weak  and  the  prodigal.  But 
the  altruist  may  still  insist  that  the  borrower,  after 
having  by  partial  payments  returned  wealth  equiva- 
lent to  the  cost  of  the  ax,  should  then  become  the 
owner  of  it  absolutely,  and  that  the  seller  in  good  con- 
science ought  not  in  the  meantime  to  charge  interest 
on  the  price,  or  charge  for  the  use  of  the  ax.  This 
means  that  the  owner  should  receive  no  benefit  or 


36  The  Problem  of  the  Unemployed 

premium  for  the  initial  industry  and  frugality  prac- 
ticed and  privations  perhaps  suffered  in  compressing 
into  the  ax  three  hundred  days  of  work.  If  law  or 
custom  prohibited  the  owner  from  charging  interest 
and  enjoying  this  premium,  why  should  he  not  also 
wait  for  some  one  else  to  make  an  ax  and  then  bor- 
row it  himself  ?  Why  should  he,  rather  than  anoth- 
er, submit  to  the  sacrifice  always  involved  in  saving, 
a  surplus  from  one's  earnings  over  and  above  one's 
expenditures  ? 

What  this  primitive  community  needed,  and  what 
all  communities  have  always  needed,  is  a  constantly 
increasing  supply  of  capital,  without  which  no  mate- 
rial progress  can  be  made,  since  capital  always  takes 
the  form  of  labor-saving  appliances.  Four-fifths  or 
more  of  the  wealth  produced  by  any  community  is 
consumed  for  the  necessities,  comforts  and  luxuries 
of  life  as  fast  as  produced;*  the  residue,  most  of 
which  consists  of  buildings,  machinery  and  material 
things  coming  within  the  definition  of  capital,  is 
wholly  the  result  of  the  ability  and  willingness  of  the 
few  to  live  on  less  than  their  incomes.  No  one,  rich  or 
poor,  can  do  this  without  exercising  some  degree  of 
self-restraint  and  self-denial.  Were  it  not  for  the  hope 
of  increasing  one's  income  by  means  of  interest, 
there  would  be  little  or  no  motive  for  practicing  the- 
economy  necessary  for  the  accumulation  of  capital. 
While  the  wants  of  mankind  are  insatiable,  and  man 
will  cheerfully  work  for  wages  with  which  to  procure 
things  which  can  be  immediately  used  or  consumed 
in  ministering  to  the  necessities  and  pleasures  of  life, 

'•^Carroll  D.  Wright,  in  Practical  Sociology,  estimates  that 
the  entire  wealth  of  the  world  about  equals  its  aggregate  earn- 
ings for  five  years. 


The  Nature  of  Interest  37 

there  must  be  a  motive  beyond  this  to  induce  the 
conservation  of  wages.  Thus  the  accumulation  of 
capital  calls  for  more  than  industry.  It  calls  for  fore- 
thought and  self-denial,  and  but  for  the  payment  of 
interest,  it  appears  that  the  reward  for  the  exercise 
of  these  virtues  would  to  a  great  extent  be  lacking. 

In  a  primitive  community,  if  all  were  equally 
favored  by  fortune  and  equally  endowed  morally, 
mentally  and  physically;  if  all  had  precisely  the 
same  tastes  and  inclinations,  and  were  alike  in  every 
particular ;  if  no  one  had  any  advantage  over  another 
on  account  of  the  land  which  he  occupied,  then  there 
would  be  no  such  thing  as  interest.  All  would  pro- 
duce and  save  alike ;  all  would  have  the  same  amount 
of  wealth,  and  no  one  would  have  occasion  to  buy 
from  another  on  credit.  While  one  man  was  storing 
his  surplus  wealth  in  an  ax,  another  would  be  storing 
his  in  something  equally  desirable ;  if  the  latter  bor- 
rowed the  ax,  he  would  have  something  equally  valu- 
able to  loan  the  ax  owner  in  exchange  for  it.  But  in 
such  community,  as  in  all  communities,  some  are 
weak  and  some  are  strong;  some  idle,  some  indus- 
trious ;  some  selfish,  others  generous ;  some  are  provi- 
dent and  others  improvident.  All  have  different 
tastes  and  inclinations,  while  there  are  ever  arriving 
new  generations  possessed  of  no  wealth  or  capital 
whatever,  and  who  have  had  no  opportunity  of  accu- 
mulating it.  Hence,  it  seems  equally  clear  that  the 
payment  of  interest  is  founded  on  the  diversity  of 
human  tastes  and  inclinations  and  the  inherent 
differences  in  human  capacities. 

When  one  borrows  a  thousand  dollars,  he  is  really 
borrowing  the  things  which  he  obtains  in  exchange 
for  the  money.    This  is  evident  from  a  clear  under- 

14854.5 


38  The  Problem  of  the  Unemployed 

standing  of  what  money  really  is,  as  already 
explained.  When  the  borrower  pays  the  debt,  he  is 
in  effect  returning  the  things  borrowed.  Thus,  I 
wish  to  engage  in  business  as  a  merchant.  I  need  so 
many  dozen  pairs  of  shoes,  so  many  bolts  of  cloth,  so 
many  sacks  of  flour,  and  quantities  of  other  articles, 
constituting  a  stock,  of  general  merchandise.  I  have 
neither  the  goods  nor  the  money  with  which  to  pur- 
chase them.  I  borrow  from  a  friend,  however,  a 
thousand  dollars  to  be  used  in  buying  the  goods 
which  I  need.  This  means  that  I  have  obtained  from 
my  friend  what  is  equivalent  to  a  warehouse  receipt, 
calling  for  a  thousand  dollars'  worth  of  any  of  the 
infinite  variety  of  commodities  stored  in  the  great 
warehouse  of  the  world's  markets.  When  I  borrow 
the  thousand  dollars,  my  friend  in  effect  gives  me  an 
order  for  the  goods  which  I  need  in  my  business. 
When  I  pay  the  debt  with  interest,  I  am  in  effect 
returning  these  same  goods  to  him,  with  payment 
for  the  use  of  them,  since  I  supply  him  with  the 
means  of  obtaining  them  or  other  commodities  of 
equal  value  from  the  same  warehouse.  Hence,  in  the 
complicated  conditions  of  modern  life,  as  well  as  at 
the  very  beginning  of  civilization,  the  payment  of 
interest,  according  to  the  economic  definition  of  the 
word,  is  simply  the  payment  of  something  for  the  use. 
of  material  things  produced  by  labor ;  and  there  is  no 
difference  in  character  between  the  payment  of  inter- 
est on  borrowed  money  and  the  payment  of  a  stipu- 
lated sum  for  the  use  of  a  machine  or  building.  In 
this  connection,  however,  the  distinction  between 
interest  and  rent  must  ever  be  borne  in  mind,  for 
when  borrowed  money  is  invested  in  land,  whether 
improved  or  otherwise,  the  payment  of  interest  on 


The  Nature  of  Interest  39 

such  portion  of  the  indebtedness  as  was  incurred  for 
the  purchase  of  the  land,  exclusive  of  any  improve- 
ments, means  the  payment  of  rent,  because  it  is  not 
paid  for  the  use  of  anything  produced  by  humian 
labor,  but  is  paid  for  the  use  of  land. 

The  ax  referred  to  was  the  product  of  three  hun- 
dred days  labor.    This  labor  was  not  devoted  to  the 
production  of  things  to  be  consumed,  as  comforts  and 
luxuries  of  life,  but  to  making  a  tool  to  assist  in  pro- 
ducing such  things.     While  labor  was  employed  in 
producing  the  ax,  it  received  no  wages.     It  might 
never  receive  wages  for  the  work  thus  performed  if 
unable  to  get  pay  for  the  use  of  the  ax;    in  other 
words  if  unable  to  collect  interest  on    the    capital 
which  the  ax  represents.     Suppose  the  tool  maker, 
after  finishing  the  ax,  was  physically  unable  to  use 
it,  and  that  while  there  were  many  people  in  the  com- 
munity able  and  anxious  to  use  the  ax,  none  of  them 
v/as  able  to  buy  it,  since  none  of  them  had  anything 
to  give  in  exchange  for  it.  It  is  clear  that  then  labor 
would  receive  no  wages  for  the  toil  expended  on  the 
ax  unless  permitted  to  receive  interest  for  its  use. 
Under  such  circumstances,  when  would  labor  begin 
to  receive  wages  for  work  performed  in  making  the 
ax?     The  answer  is,  just  as  soon  as  it  began  to 
receive  something  for  the  use  of  the  ax,  or  in  other 
words,  as  soon  as  it  began  to  receive  interest  on  the 
capital  which  the  ax  represented,  and  not  before. 
Hence,  in  this  instance  at  least,  interest  would  be  in 
effect  wages  paid  for  labor  employed  in  making  the 
ax ;  nor  would  the  fact  that  the  tool  maker  was  cap- 
able of  using  the  ax  himself  alter  the  situation  and 
make  the  payment  of  interest  for  its  use  anything 


40  The  Problem  of  the  Unemployed 

more  or  less  in  reality  than  the  payment  of  wages 
for  labor  performed  in  producing  it. 

And  so  it  will  be  found  in  all  cases,  under  modern 
as  well  as  primitive  conditions,  interest  on  capital  is 
in  effect  the  deferred  payment  of  wages  to  labor.* 
The  capitalists  may  advance  the  laborer  wage  money 
as  the  work  progresses,  but  on  its  completion,  when 
the  capitalist  collects  interest  on  the  cost  of  the 
appliance,  he  is  simply  getting  back  the  wage  money  • 
which  he  advanced  to  the  laborers  who  made  it.  And 
this  is  also  the  case  even  though  the  finished  labor- 
saving  appliances  may  be  the  product  of  a  multitude 
of  individual  laborers  who  have  been  assisted  by 
capital  in  producing  it  and  who  have  been  paid  wages 
as  the  work  progressed.  If,  in  the  case  of  the  ax, 
what  the  ax  owner  got  for  its  use  was  in  effect  wages, 
then  what  the  owner  of  a  steamship  costing  a  million 
dollars  gets  for  its  use  must  in  effect  be  wages  also. 
True  interest  therefore  in  reality  is  wages  paid  for 
stored  up  labor. 

A  vast  amount  of  interest  is  paid  on  indebtedness 
incurred,  however,  not  for  the  use  of  capital,  but  for 
things  in  the  nature  of  wealth  intended  for  imme- 
diate consumption,  such  as  articles  consumed  in  war 
and  in  the  preparation  for  war,  and  in  living 
expenses,  and  for  capital  that  has  been  lost  or 
destroyed ;  and,  most  important  of  all,  for  indebted- 
ness incurred  for  land  and  the  use  of  land.  It  is 
obvious  that  interest  paid  on  indebtedness  of  this 
kind  as  well  as  indebtedness  incurred  in  the  purchase 
of  land,  cannot  be  regarded  as  wages  paid  to  labor, 

*0f  course  this  refers  only  to  true  interest,  not  to  extortions 
sometimes  due  to  law  made  monopoly  of  the  medium  of  ex- 
change. 


The  Nature  of  Interest  41 

since  it  is  not  paid  for  the  use  of  appliances  produced 
by  labor  which  assist  in  the  production  of  wealth. 

The  conclusion,  therefore,  is  that  interest  is  what 
is  paid  for  the  use  of  wealth  employed  as  capital  in 
the  production  of  more  wealth ;  that  it  is  the  reward 
for  thrift  and  self-denial ;  that  its  payment  is  inevit- 
able, owing  to  the  inherent  differences  in  the  abilities 
and  tastes  of  mankind;  that  it  is  but  the  deferred 
payment  of  wages  to  labor,  and  that  its  payment 
\<,'orks  no  hardship  upon  labor,  nor  does  it  lessen  the 
portion  of  the  product  w^hich  labor  would  otherwise 
receive,  since  but  for  its  payment,  there  would  be  no 
incentive  to  provide  labor  with  the  use  of  labor- 
saving  appliances.  Interest,  as  thus  explained,  hov/- 
ever,  must  be  limited  strictly  to  the  economic  defini- 
tion of  the  word. 


CHAPTER  IV. 

THE  NATURE  OF  RENT. 

THAT  there  exists  to  some  extent  a  popular  preju- 
dice against  the  payment  of  interest,  and  appar- 
ently none  at  all  against  the  payment  of  rent,  is  due 
to  the  fact  that  the  distinction  between  land  and 
wealth,  and  the  difference  between  the  payment  of 
rent  for  land  and  the  payment  of  interest  for  capital, 
is  not  fully  understood.  The  difference  is  this: 
Economic  rent  is  what  labor  pays  for  permission  to 
produce  wealth ;  interest  is  what  it  pays  for  the  use 
of  appliances  which  assist  in  the  production  of 
wealth.  Rent  is  paid  for  the  license  to  use  the 
machine ;  interest  is  paid  for  the  use  of  the  machine 
itself.  Hence  it  would  seem  to  follow,  since  interest 
is  but  the  deferred  payment  of  wages,  that  if  nothing 
were  paid  land  for  the  privilege  of  use,  all  wealth, 
including  that  produced  with  the  aid  of  the  machin- 
ery, would  go  to  labor  as  wages.  In  this  connection, 
it  is  not  meant  that  employees  would  get  the  entire 
product,  but  that  the  wages  which  they  would  receive 
together  with  the  portion  going  as  wages,  to  the 
employers,  would  include  it  all.  In  such  event  free 
competition  would  so  regulate  the  division  of  the 
product  that  each  v/ould  receive,  approximately,  the 
portion  of  the  wealth  which  he  produced.  The  diffi- 
culty is,  however,  that  as  soon  as  the  factor  of  rent 
comes  into  play,  competition,  which  fixes  the  price 
of  everything  connected  with  the  industrial  world, 


The  Nature  of  Rent  43 

and  regulates  interest  and  wages,  is  no  longer  free ; 
for  although  any  product  of  labor  can  be  indefinitely 
increased  according  to  the  demand  for  it,  an 
increased  demand  for  land  can  only  increase  the 
price  which  capital  and  labor  must  pay  for  the  privi- 
lege of  using  it. 

The  laws  of  supply  and  demand  do  not  affect  land 
and  capital  and  labor  in  the  same  way;  increased 
demand  for  anything  produced  by  labor  will  increase 
the  supply,  and  only  temporarily  affect  the  price, 
while  an  increased  demand  for  land  cannot  increase 
the  supply,  but  will  permanently  increase  the  price. 
Thus,  an  increased  demand  for  axes  will  increase  the 
number  of  axes  produced,  while  competition  among 
ax  producers  will  soon  reduce  the  price  charged  for 
axes,  or  for  the  use  of  axes,  to  the  point  where  labor, 
applied  to  the  production  of  axes,  will  be  no  more 
profitable  than  labor  applied  to  the  production  of 
other  articles;  but  since  increased  demand  for  land 
cannot  increase  the  area  of  the  earth,  the  effect  of 
growth  of  population,  which  increases  the  demand, 
is  simply  to  increase  the  portion  of  the  wealth  pro- 
duced which  goes  to  the  owners  of  land. 

In  the  primitive  community  referred  to,  rent  made 
itself  felt  in  the  distribution  of  wealth  as  soon  as  one 
piece  of  land  acquired  a  greater  value  than  another. 
This  must  have  happened  at  the  very  dawn  of  civili- 
zation, and  with  civilization  came  the  private  owner- 
ship of  land.  Wherever  land  has  become  valuable,  a 
private  owner  for  it  has  always  been  recognized  by 
law  and  custom.  The  right  of  an  individual  to  the 
untrammeled  control  of  the  tract  of  land  to  which  he 
has  acquired  a  title  approved  by  the  government  hav- 
ing jurisdiction  over  it,  has  been  admitted  from  time 


44  The  Problem  of  the  Unemployed 

immemorial.  Investments  in  land  have  generally 
been  made  in  good  faith  by  all  classes  of  people  under 
an  implied  agreement  that  society  would  continue  to 
protect  private  property  in  land  in  the  future  as  in 
the  past.  For  this  reason  it  is  sometimes  insisted 
that  good  faith  and  good  conscience  demand  that  no 
legislation  should  be  even  contemplated  which  would 
abolish  the  privileges  which  the  ownership  of  land 
confers — privileges  in  which  all  have  the  right  to 
participate  on  payment  of  the  price  demanded. 
Nevertheless,  no  headway  toward  acquiring  a  knowl- 
edge of  the  fundamental  truth  on  which  the  science 
of  political  economy  is  founded  can  be  made,  without 
a  clear  conception  of  the  essential  differences 
between  property  in  land  and  property  in  the  prod- 
ucts of  industry.  In  stating  the  facts,  however,  on 
which  these  differences  are  founded,  no  attack  on 
vested  rights  is  to  be  inferred,  for  political  economy 
has  nothing  to  do  with  vested  rights  or  vested  wrongs 
but  all  and  only  to  do  with  truth.  However  injurious 
in  some  respects  the  system  by  which  the  bounties  of 
nature  have  so  far  been  regulated  and  controlled  may 
be  to  an  overwhelming  majority  of  mankind,  never- 
theless it  need  not  be  assumed  that  such  salutary 
changes  as  science  may  suggest  cannot  or  will  not 
be  made  without  proper  compensation  to  all  whose 
wealth  has  been  invested  in  land  on  the  faith  of  the 
permanency  of  conditions  now  existing. 

The  title  to  an  article  constituting  wealth  can  be 
traced  to  the  maker  of  it,  to  the  person  or  persons 
whose  toil  created  it,  to  someone  who  clearly  had  a 
right  to  use  and  dispose  as  he  saw  fit  of  the  thing 
which  his  own  labor  had  produced,  either  by  sale,  or 
gift,  or  otherwise.    Not  so,  however,  as  to  land.    No 


The  Nature  of  Rent  45 

one's  title  to  land  can  be  traced  back  to  the  creator 
of  it,  since  land  is  not  the  product  of  labor.  Take 
the  chain  of  title  to  any  tract  of  land  and  go  back 
with  it,  step  by  step,  to  its  beginning.  It  will  be 
found  to  have  originated  in  an  agreement  on  the  part 
of  those  who  constituted  the  government  at  that  time, 
to  the  effect  that  John  Smith  and  his  heirs  and 
assigns  should  forever  dictate  the  terms  on  which 
men  of  that  and  all  succeeding  generations  should 
have  the  privilege  of  producing  wealth  on  or  from 
the  particular  tract  of  land  thus  granted  the  said 
John  Smith.  The  agreement  gave  John  Smith  the 
right  either  to  produce  wealth  on  this  land  himself, 
or  to  say  how  much  of  the  wealth  produced  on  it  by 
others  should  be  given  him  for  allowing  its  use  for 
that  purpose.  Private  ownership  of  land  means  that 
by  virtue  of  a  compact  between  the  then  existing 
government  and  some  individual,  made  it  may  be 
centuries  ago,  the  present-day  owner  of  a  tract  of 
land  has  the  power  to  prevent  any  and  all  men  from 
using  it  for  wealth-producing  purposes,  or  for  any 
other  purposes,  except  on  terms  satisfactory  to  such 
owner,  subject  only  to  the  right  of  eminent  domain 
on  the  part  of  the  State. 

The  nature  of  a  title  to  land  may  be  shown  by  the 
following  illustration :  The  government  of  England, 
as  embodied  in  William  the  Conqueror  nine  hundred 
years  ago,  might  have  given  one  of  the  courtiers  of 
that  day,  as  a  reward  for  almost  any  kind  of  service, 
infamous  or  otherwise,  a  patent  of  nobility,  and 
decreed  that  he  and  his  eldest  male  lineal  descendant, 
as  the  Earl  of  Enfield,  should  receive  one-tenth  of 
the  income  of  every  worker  living  on  a  definitely 
described  tract  of  land  known  as  Enfield,  at  that  time 


46  The  Problem  of  the  Unemployed 

or  at  any  time  thereafter  in  all  the  ages  to  follow. 
This  would  not  have  been  an  unreasonable  act  of 
legislation  for  those  times,  and  especially  so  since  by 
its  terms  no  one  was  compelled  to  live  in  the  Parish 
of  Enfield.  As  to  whether  or  not  the  Parish  of  Enfield 
would  have  increased  in  population  as  rapidly  as  the 
surrounding  parishes,  would  have  depended  on  the 
terms  on  which  the  land  owners  of  Enfield  allowed 
wealth-producers,  meaning  workers  of  every  class 
engaged  in  the  actual  production  of  wealth,  to  use 
land  in  Enfield  for  wealth-producing  purposes.  It 
would,  of  course,  have  been  impossible  for  them  to 
obtain  as  much  for  it  as  the  owners  of  land  in  adjoin- 
ing parishes  received  for  land  of  the  same  quality; 
but  by  reducing  rents,  or  reducing  the  price  of  land 
(and  this  they  would  have  been  compelled  to  do  in 
order  to  receive  any  income  from  the  land  at  all) ,  the 
landlords  of  Enfield  would  have  made  that  parish  as 
desirable  as  any  other  place  for  wealth-producers  to 
live  in.  Thus,  since  the  aggregate  amount  of  wealth 
paid  by  wealth-producers  to  land  owners  for  the 
privilege  of  producing  wealth  amounts  to  probably 
more  than  ten  per  cent,  of  the  total  product,  if  the 
workers  in  the  adjoining  parishes  were  required  to 
pay,  say,  the  equivalent  of  fifteen  per  cent,  or  more 
of  their  incomes  to  landlords  as  rent,  as  would  doubt- 
less have  been  the  case,  then  the  landlords  of  Enfield, 
by  charging  rent  equivalent  to,  say,  only  five  per 
cent,  of  the  wealth  produced,  would  have  placed  the 
-workers  of  Enfield  on  a  parity  with  those  in  the 
adjoining  parishes.  The  difference  would  have  been 
that  the  fifteen  per  cent,  of  a  worker's  income  paid 
for  the  privilege  of  living  in  Enfield  would  have  been 
divided  between  the  Earl  of  Enfield  and  the  landlords 


The  Nature  of  Rent  47 

of  Enfield,  while  the  same  percentage  paid  for  the 
privilege  of  living  in  an  adjoining  parish  would  have 
gone  to  the  landlords  alone ;  hence  it  is  evident  that 
rent  is  the  same  as  a  tax  on  the  incomes  of  Vv^ealth- 
producers,  only  it  is  paid  to  individuals  instead  of 
being  paid  to  the  government, 

Kecurring  to  the  illustration,  it  will  be  assumed 
that  a  city  with  a  population  of  several  hundred  thou- 
sand grew  up  within  the  confines  of  Enfield,  and  that 
today  the  aggregate  income  of  its   inhabitants   is 
twenty  million  dollars  a  year,  of  which  the  eldest 
male  lineal  descendant  of  the    Earl   of    Enfield    is 
receiving  ten  per  cent,  or  two  million  dollars  annual- 
ly.    It  would  seem  at  first  thought  preposterous  to 
assume  that  the  law  conveying  to  the  original  Earl 
and  his  successors  one-tenth  of  the  income  of  every 
person  living  in  Enfield  would  not  have  been  repealed 
long  ago ;  or  that  a  free  people  in  an  enlightened  age 
would  feel  that  it  was  just  and  proper  for  them  to 
hand  over  to  the  present  Earl  one-tenth  of   their 
incomes  simply  because  of  the  fiat  of  William  the 
Conqueror  made  nine  hundred  years  ago.    But  sup- 
pose their  fathers  and  forefathers  for  a  score  pr 
more  of  generations  had  submitted  to  the  law  and 
adapted  themselves  to  it,  and  permitted  the  long 
succession  of  Earls  of  Enfield  to  collect  this  tribute 
and  to  rely  in  good  faith  on  its  being  paid,  and  to  live 
in  a  style  of  magnificence  commensurate  with  this 
ever-increasing  income,  and  thereby  to  become  the 
embodiment  of  the  highest  examples  of  culture  which 
wealth  and  lineage  can  bestow.    Suppose,  also,  that, 
instead   of  Enfield   being  an  exceptional   case,  the 
same  percentage  of  the  incomes  of  people  living  in 
other  places,  and  in  fact  on  all  the  other  tracts  of  land 


48  The  Problem  of  the  Unemployed 

in  the  Kingdom,  had  also  been  allotted  by  William 
the  Conqueror  and  his  successors  to  various  other 
persons  and  their  descendants,  together  with  per- 
mission to  sell  and  assign  the  rights  and  privileges 
thus  acquired,  and  to  subdivide  the  territory  to  which 
the  same  applied.  That  thus  a  powerful  minority  of 
the  people,  embracing  most  of  the  wealth  and  social 
influence  of  the  land,  was  interested,  and  had  always 
been  interested,  in  maintaining  the  laws  on  which 
these  privileges  were  founded.  In  that  case  a  very 
different  situation  would  be  presented.  To  repeal  the 
law  and  cut  off  the  privileges,  in  the  purchase  of 
which  many  people  had  invested  a  large  portion  of 
the  savings  of  a  lifetime;  to  suddenly  reduce  from 
luxury  to  but  a  competency,  and  in  some  instances  to 
actual  want,  many  of  the  best  peopje  in  every  com- 
munity, would  probably  seem  to  most  honest  minds 
unjust,  and  nothing  short  of  confiscation  and  rob- 
bery. In  view  especially  of  the  fact  that  organized 
society  had  for  hundreds  of  yiears  permitted  these 
privileges  to  be  enjoyed  and  sold  and  disposed  of 
without  objection  or  protest,  most  people  would  be 
likely  to  insist  on  the  adoption  of  some  plan  of  com- 
pensation whereby  the  losses,  for  which  society  as  a 
whole  was  responsible,  should  be  apportioned  among 
all.  Be  this  as  it  may,  the  question  of  ethics  sug- 
gested at  this  point  is  not  one  to  be  decided  by  the 
political  economist. 

■  The  fact  is,  that  while  neither  William  the  Con- 
queror nor  any  of  his  successors  ever  granted  in 
express  terms  to  the  Earl  of  Enfield,  or  to  any  other 
person,  the  right  to  collect  one-tenth  or  more  of  the 
incomes  of  all  the  people  then  living,  and  thereafter 
to  live,  on  any  specified  tract  of  land,  the  same  thing 


The  Nature  of  Rent  49 

was  nevertheless  accomplished  in  a  much  more  effect- 
ual manner  when  the  title  to  the  tract  of  land  was 
granted  to  the  Earl  of  Enfield,  "his  heirs  and  assigns 
forever,"  as  the  legal  phrase  runs;  and  this  is  what 
private  property  in  land  means.  It  means  nothing 
more  nor  less  than  that  the  owner,  by  virtue  of  a 
legal  enactment,  probably  made  by  men  long  since 
dead  and  buried,  has  the  right  to  collect  a  constantly 
increasing  portion  of  the  income  of  all  who  are 
allowed  to  employ  themselves  in  the  production  of 
wealth  on  the  land  which  his  title  embraces.  That 
such  collection  may  be  made  in  advance  when  one 
buys  and  pays  for  the  site  on  which  his  own  home  or 
farm  or  business  establishment  is  located,  instead  of 
paying  rent  annually  or  otherwise  for  its  use,  does 
not  change  the  character  of  the  payment — it  is  in 
each  instance,  as  in  all  other  cases,  the  payment  of 
tribute  money,  not  for  wealth  nor  for  the  use  of 
wealth,  but  for  the  privilege  of  producing  wealth — 
tribute  paid  not  to  the  government  but  to  individuals. 


CHAPTER  V. 

EFFECT  OF  IMPROVEMENTS  IN  LABOR-SAVING  MACHIN- 
ERY AND  PROGRESS  GENERALLY  ON  RENT, 
INTEREST  AND  WAGES. 

AN  attempt  will  now  be  made  to  apply  the  factors 
of  production  and  distribution,  as  heretofore 
defined  and  explained,  to  the  solution  of  the  economic 
problems  referred  to  in  the  first  chapter.  Under  the 
plan  adopted  for  presenting  the  subject,  objections 
which  may  arise  in  the  mind  of  the  reader  to  propo- 
sitions when  first  announced  and  but  briefly 
explained,  will  often  be  found  anticipated  and 
answered  in  subsequent  pages. 

Wealth  can  only  be  produced  in  a  civilized  com- 
munity by  the  use  of  land  and  capital  as  well  as  by 
the  expenditure  of  human  labor.  A  portion  of  thq 
product  of  every  wealth-producing  enterprise,  in 
effect,  goes  to  a  land  owner  as  rent,  another  portion 
to  a  capitalist  as  interest,  and  another  portion  to  a 
laborer  as  wages.  As  a  general  rule  all  incomes, 
except  those  of  the  character  presently  referred  to, 
are  made  up  of  rent,  interest  or  wages  singly  or  in 
combination  with  each  other.  Causes  which  increase 
rent,  or  the  value  of  land  (which  is  the  same  thing), 
without  increasing  wages  and  interest  in  a  corre- 
sponding degree,  result  in  increasing  dispropor- 
tionately the  incomes  of  those  whose  wealth  is  prin- 
cipally derived  from  the  rent  of  land  or  from  increase 
in  the  value  of  land;  causes  which  increase  wages 


Effect  of  Improvements  51 

without  increasing  in  a  corresponding  degree  rent 
and  interest,  result  in  putting  a  greater  portion  of 
wealth  into  the  hands  of  those  whose  incomes  are 
derived  principally  from  wages,  and  so  also  g.s  tq 
causes  affecting  interest. 

It  is  thus  apparent  that  the  natural  law  which 
controls  the  distribution  of  wealth  must  be  found  in 
the  causes  affecting,  respectively,  rent,  interest  and 
wages.  The  income  of  the  mechanic  owning  the  house 
in  which  he  lives  is  made  up  of  rent,  interest  and 
wages.  Say  that  the  building  is  worth  a  thousand 
dollars,  the  land  on  which  it  stands  five  hundred 
dollars,  and  that  interest  is  6  per  cent,  per  annum. 
To  arrive  at  his  entire  income  there  must  be  added 
to  his  wages  of,  say,  six  hundred  dollars  per  year, 
6  per  cent,  on  the  value  of  the  land  and  6  per  cent, 
on  the  value  of  the  improvements.  His  total  income, 
therefore,  is  $690  per  year,  of  which  $60  is  rent,  $30 
interest  and  $600  wages.  As  to  a  mechanic  thus 
situated,  a  10  per  cent,  increase  in  wages  would  be  of 
greater  benefit  than  a  10  per  cent,  increase  in  rents 
or  in  land  values.  Reflection  will  show  that  all 
incomes  can  thus  be  analyzed  and  portions  of  same 
traced  to  one  or  more  of  the  factors  of  rent,  interest 
and  wages. 

While  it  is  true  that  much  wealth  in  this  country 
is  acquired  in  connection  with  incomes  which  cannot 
be  attributed  wholly  to  rent,  interest,  or  wages,  still 
the  aggregate  amount  of  wealth  thus  appropriated, 
for  which  no  equivalent  is  given  in  the  furnishing  of 
land,  or  capital,  or  in  the  giving  of  service,  is  small 
in  comparison  with  the  entire  annual  product,  of 
probably  twenty  billions  or  more.  The  conditions 
under  which  wealth  is  thus  diverted,  however,  are 


52  The  Problem  of  the  Unemployed 

not  natural  but  exceptional  and  temporary,  and  are 
often  attributable  to  an  improper  exercise  of  govern- 
mental powers.  Among  such  exceptions  are  incomes 
in  the  nature  of  pensions  from  the  government, 
incomes  acquired  by  fraud,  or  theft,  or  by  extortions 
forced  by  combinations  in  restraint  of  trade,  or  by 
speculations,  or  by  means  of  special  privileges,  such 
as  patent  rights,  and  privileges  founded  on  a  tariff, 
or  on  discriminations  in  railroad  rates.  Uniform 
natural  laws  can  no  more  control  the  manner  of  the 
acquisition  of  wealth  thus  obtained,  though  no  doubt 
much  of  it  is  honestly  acquired,  than  in  the  case  of 
wealth  stolen  by  highwaymen.  But  the  fact  that  a 
portion  of  the  product  of  any  wealth-producing 
enterprise  may  be  diverted  under  such  exceptions 
can  in  no  way  affect  the  causes  constantly  in  opera- 
tion, which  control  the  distribution  of  the  remainder 
of  it  among  the  three  factors  of  production,  viz: 
Land,  Capital  and  Labor.  It  is,  therefore,  neither 
necessary  nor  profitable,  at  this  point,  to  consider  at 
length  exceptions  of  the  character  mentioned  to  the 
general  rule  that  incomes  are  made  up  of  rent,  inter- 
est and  wages. 

Since  in  any  wealth-producing  enterprise,  a  man 
may  be  interested  as  a  land  owner,  a  capitalist  and 
a  laborer  at  the  same  time,  and  his  income  from  it 
may  be  attributable  in  part  to  rent,  in  part  to  inter- 
est, and  in  part  to  wages,  confusion  of  thought  will 
arise  unless  the  distinction  between  the  land  owner, 
the  capitalist  and  the  laborer,  as  such,  is  sharply 
drawn  in  the  reader's  mind.  To  discover  the  causes 
which  effect  the  distribution  of  wealth  the  sources  of 
incomes  must  be  separately  considered.  It  must  also 
be  remembered  that  the  word  "labor"  includes  aU 


Effect  of  Improvements  53 

effort,  either  mental  or  physical,  put  forth  in  the  pro- 
duction of  wealth ;  also,  that  the  so-called  profits  of 
capital,  not  attributable  to  rent  or  interest,  and  not 
coming  within  the  exception  just  referred  to,  are  but 
the  wages  of  employers.  Such  wages  under  present 
conditions  may  be  excessive,  but  nevertheless  all 
wealth  acquired  from  service  of  this  character  comes 
within  the  true  economic  definition  of  wages.  The 
portion  of  an  employer's  effort,  however,  expended 
on  some  scheme  by  which  he  seeks  to  acquire  wealth 
produced  by  others,  as,  for  instance,  by  organizing 
and  carrying  on  a  combination  in  restraint  of  trade, 
is  not  labor,  nor  are  the  fruits  of  such  effort  wages. 
Such  labor  is  not  expended  in  the  production  of 
wealth.  It  does  not  increase  the  world's  store  of 
wealth. 

Bearing  in  mind  the  definitions  of  the  terms  used, 
and  especially  the  distinction  between  land  on  the 
one  hand  and  capital  on  the  other  hand,  no  difficulty 
will  be  experienced  in  determining  the  class  to  which 
goes  the  lion's  share  of  the  benefit,  as  between  land 
owners,  capitalists  and  laborers,  resulting  from 
improvements  in  labor-saving  appliances  and  growth 
of  population,  and  also  from  moral  and  material 
progress  of  every  description.  It  is  clear  that  if 
progress  of  the  character  referred  to  benefits  land 
owners,  it  will  be  indicated  by  an  increase  in  the 
value  of  land;  if  it  benefits  laborers,  by  an  increase 
in  wages,  including  the  wages  of  employers,  and  if  it 
benefits  capitalists  as  such,  it  will  be  indicated  by  an 
increase  in  the  rates  of  interest.  We  can  thus  deter- 
mine, approximately,  the  effect  of  labor-saving  appli- 
ances and  material  progress  generally  on  rent,  inter- 
est and  wages;  or,  in  other  words,  on  land  owners. 


54  The  Problem  of  the  Unemployed 

capitalists  and  laborers,  respectively.  If  the  direct 
effect  in  the  long  run  is  only  to  increase  rent  or  the 
value  of  land,  then  land  owners  alone  can  be  directly 
benefited  by  it.  If  it  appears  that  most  if  not  all  the 
benefit  goes  to  land,  then  little  or  none  can  go  to 
labor;  therefore,  if  improvements  do  not  naturally 
and  directly  increase  wages,  then  in  the  fact  just 
stated,  viz.,  the  fact  that  the  principal  part  of  all  the 
increased  wealth  produced  by  improvements  goes  in 
the  long  run  to  land,  and  is  absorbed  in  the  increase 
in  the  value  of  land,  will  be  found  the  reason  for  the 
failure  of  wages  to  increase  in  the  same  proportion 
as  the  wealth-producing  power  of  the  wage-earner 
increases.  If  contemporaneously  with  improvements 
in  labor-saving  appliances,  with  growth  of  popula- 
tion and  progress  generally,  we  find  an  increase  of 
rents,  or  an  increase  in  the  value  of  land,  with  no  cor- 
responding increase  in  wages,  or  in  rates  of  interest, 
then  it  follows  that  the  ultimate  effect  of  such  prog- 
ress is  to  increase  the  value  of  land  only,  hence 
neither  rising  v/ages  nor  rising  rates  of  interest  can 
naturally  result  from  it,  no  matter  to  what  extent  the 
wealth-producing  capacity  of  laborers  may  be  in- 
creased thereby. 

The  questions  then  to  be  answered  in  the  first 
place  are  these:  (1)  Do  improvements  in  labor- 
saving  machinery,  and  material  progress  generally, 
naturally  and  inevitably  increase  interest?  (2)  Do 
they  naturally  and  inevitably  increase  wages?  (3) 
Do  they  naturally  and  inevitably  increase  rent  or  the 
value  of  land?  The  questions  thus  propounded  will 
be  answered  in  the  order  stated. 

The  popular  impression,  especially  among  those 
with  socialistic  tendencies,  is  that  capital,  as  such,  is 


Effect  of  Improvements  55 

the  chief  recipient  of  the  benefits  arising  from  indus- 
trial progress.  This  impression  exists  because  the 
points  of  difference  between  land  and  capital,  and 
also  between  the  ownership  of  capital  and  the  use 
of  capital  by  its  owner,  or  by  the  borrower  of  it,  are 
not  clearly  understood  and  appreciated.  The  obvious 
and  indisputable  fact,  however,  regardless  of  any 
theory  about  it,  is,  that  increase  in  population  and 
improvements  in  the  arts  and  sciences,  while  accom- 
panied by  rising  land  values  and  increasing  rents  on 
one  hand,  are  always  followed  by  a  fall  in  the  rates 
of  interest  on  the  other  hand.  The  first  question 
must  therefore  be  answered  in  the  negative. 

In  sparsely  settled  and  disorderly  communities 
the  world  over,  interest  is  high  and  rent  is  low; 
in  other  words,  in  such  communities,  comparatively 
large  sums  are  paid  for  the  use  of  capital  or  wealth, 
while  comparatively  small  sums  are  paid  for  the 
use  of  land  or  for  the  purchase  of  land.  With  im- 
provements in  government  and  growth  of  popula- 
tion, this  is  always  reversed,  and  the  rate  of  interest 
falls,  while  the  price  of  land  rises.  Thus,  on  Manhat- 
tan Island,  two  hundred  and  fifty  years  ago,  interest 
was  15%  per  annum,  and  a  lot  suitable  for  business 
purposes  could  have  been  bought  for  $500,  or  the 
use  of  it  obtained  for  a  rental  of  $75  a  year.  To- 
day, in  New  York,  interest  has  fallen  to  4%  per  an- 
num, but  the  same  lot  is  worth  a  million  dollars,  and 
the  use  of  it  can  not  be  had  short  of  thirty  thousand 
dollars  a  year.  In  London  and  in  Nev.'  York,  where 
population  is  most  dense,  and  the  arts  and  sciences 
have  reached  the  highest  degree  of  perfection,  land 
is  high,  but  the  rate  of  interest  is  low;  while  in 


56  The  Problem  of  the  Unemployed 

frontier  towns  and  cities,  interest  is  high  and  land 
is  low. 

The  correctness  of  the  answer  given  is  also  con- 
clusively shown  by  the  fact  that  while  inventions 
have  multiplied  enormously,  even  within  the  memory 
of  the  present  generation,  nevertheless  rates  of  inter- 
est are  lower  than  ever  before.  And  in  the  most 
highly  civilized  countries,  where  labor-saving  im- 
provements are  most  extensively  used,  interest  is 
lower  than  in  partially  civilized  ones  where  they  are 
little  used. 

That  growth  of  population  and  progress  do  not  in- 
crease the  value  of  building  improvements,  or  inter- 
est on  the  capital  represented  by  them,  is  obvious, 
yet  confusion  of  thought  on  this  point  is  sometimes 
manifested  by  confounding  ground  rent  with  the 
interest  on  the  capital  which  the  building  represents. 
The  total  rent  of  a  building,  including  the  ground, 
may  increase  from  ten  thousand  dollars  to  twenty 
thousand  dollars  a  year,  but  it  is  not  the  building 
that  has  become  valuable,  nor  is  the  increased  in- 
come obtained  from  the  use  of  the  entire  property 
attributable  to  increase  in  rates  of  interest.  In  fact, 
the  building  may  have  depreciated  in  value.  It  is 
the  land,  and  the  land  alone,  on  which  the  building 
stands,  which  is  more  valuable.  The  increase  in' 
rent  which  the  tenant  pays  is  not  for  the  use  of  the 
building,  or  any  part  of  it,  but  for  the  use  of  land 
which  has  become  more  valuable.  That  such  im- 
provements do  not  increase  in  value  from  causes 
which  increase  the  value  of  land,  is  apparent  also 
from  the  fact  that  insurance  companies  never  know- 
ingly insure  a  building  for  more  than  it  will  cost  to 
replace  it. 


Eifect  of  Improvements  57 

Now  as  to  the  second  question :  Do  improvements 
increase  wages?  It  will  be  noted  that  the  subject  of 
inquiry  is  confined  to  the  "natural  and  inevitable" 
effects  upon  wages  of  labor-saving  improvements 
and  progress  generally,  or,  in  other  words,  to  the 
direct  as  distinguished  from  the  indirect  effects. 
Thus,  contemporaneously  with  an  enormous  increase 
in  the  wealth-producing  power  of  the  employee,  there 
may  be  a  considerable  increase  in  the  purchasing 
power  of  his  wages.  Some  classes  especially,  if  not 
all  classes  of  laborers,  may  be  better  off  now  than 
they  were,  for  instance,  fifty  years  ago,  although  this 
is  denied  by  many  who  have  investigated  the  mat- 
ter ;  yet,  nevertheless,  if  they  are  better  off  this  may 
not  be  attributable  to  the  direct  effect  of  labor-saving 
inventions.  Improvements  in  labor-saving  machin- 
ery might,  for  instance,  enormously  increase  the 
amount  of  wealth  produced  by  slaves,  but  in  such 
event,  free  competition  and  the  law  of  supply  and 
demand  would  not  operate  with  irresistible  force  to 
compel  masters  to  spend  more  in  the  better  main- 
tenance of  slaves,  or,  in  other  words,  to  pay  slaves 
higher  wages.  The  increased  ability  of  masters, 
however,  to  do  so,  coupled  with  kindly  feelings  and  a 
disposition  to  make  the  slave  less  discontented  with 
his  lot,  would  doubtless  bring  about  some  slight  im- 
provement in  his  condition,  not  as  the  direct,  but  as 
the  indirect  effect  of  the  increased  amount  of  wealth 
produced  by  slaves.  So,  in  the  same  way,  the  im- 
provement, if  any,  in  the  condition  of  employees, 
may  not  be  attributable  to  the  natural  and  inevitable 
result  of  inveLtions  under  the  operation  of  the  law 
of  supply  and  demand  and  free  competition,  but  to 
combinations  of  workingmen,  and  to  public  senti- 


58  The  Problem  of  the  Unemployed 

ment  which  demands  that  laborers  shall  receive  some 
benefit  from  inventions.  It  may  also  be  attributable 
in  part  to  a  vague  fear  of  revolution  if  wages  were 
crowded  to  the  lowest  possible  point ;  also  in  part  to 
sympathy  of  many  employers  toward  their  em- 
ployees, as  well  as  to  other  like  causes. 

It  will  be  found  that  labor-saving  processes,  as 
v/ell  as  increase  of  population,  under  the  laws  of 
supply  and  demand  and  free  competition,  have  the 
direct  effect  of  enhancing  the  value  of  land  and  the 
price  paid  for  the  use  of  it ;  the  question  is,  do  these 
forces,  in  the  same  way,  also  directly  increase  the 
price  paid  for  labor?  This  question  cannot  be  an- 
swered in  the  affirmative  by  simply  showing,  if  it 
can  be  shown,  that  wages  are  higher  now  than  for- 
merly. For  wages  might  rise  to  some  extent  from 
causes  already  referred  to,  even  though  the  unre- 
stricted operation  of  the  laws  of  supply  and  demand 
would  cause  them  to  fall  with  increase  of  population. 

The  question  as  to  whether  wages  of  employees  are 
in  fact  rising  or  falling — as  to  whether  they  are  rela- 
tively higher  today  than  before  the  introduction  of 
modern  labor-saving  appliances — is  one  about  v/nich 
much  difference  of  opinion  exists.  The  difficulty  does 
not  lie  so  much  in  ascertaining  the  amount  in  dollars, 
or  shillings  and  pence,  paid  employees  in  former 
days,  as  in  arriving  at  the  purchasing  power  of 
money  at  that  time.  In  this  connection,  it  is  instruct- 
ive to  take  at  random  the  views  of  those  who  have  a 
personal  experience  of  forty  or  fifty  years  to  draw 
upon.  It  will  be  found  that  the  man  who  has  made 
a  pecuniary  success  of  life  is  more  apt  to  think  that 
wages  are  higher  and  are  growing  higher,  than  the 
less  successful  one  who  is  still  working  in  the  ranks. 


Effect  of  Improvements  59 

Those  of  the  laboring  class  usually  insist  that  wages 
are  lower  and  that  the  struggle  for  existence  is  hard- 
3r.  This  perhaps  will  be  found  to  be  the  impression 
of  a  majority  of  all  classes  who  are  approached  upon 
the  subject. 

Carroll  D.  Wright,  in  "Practical  Sociology,"  esti- 
mates that  hours  of  labor  have  been  reduced  10% 
since  1860,  and  that  the  purchasing  power  of  wages 
in  1902,  measured  by  wholesale  prices,  was  80% 
higher  than  in  1860.  On  the  other  hand,  Mr.  Fair- 
banks, in  an  interview  while  a  candidate  for  the  Vice- 
Presidency,  in  referring  to  the  way  in  which  he  man- 
aged to  get  through  college,  is  reported  as  saying: 
"I  received  good  wages  by  working  on  Saturdays  at 
$1.50  a  day,  which  was  equal  to  about  $3.00  now." 

The  wages  of  the  agricultural  and  unskilled  labor- 
ers of  England  are  now  less  than  one-half  of  what 
they  were  during  the  fifteenth  century,  nor  are  they 
any  higher  today  than  at  the  end  of  the  thirteenth 
centurv\  This  is  especially  the  case  as  regards  the 
ability  of  the  workingman  to  provide  himself  with 
the  essentials  of  life,  such  as  shelter,  food,  fuel  and 
clothing.  At  the  end  of  the  fifteenth  century,  wages 
of  employees  generally  in  England  were  from  three 
to  four  times  higher  than  in  the  early  part  of  the 
nineteenth  century.  And  not  only  so,  but  from  the 
middle  of  the  fourteenth  to  the  middle  of  the  six- 
teenth century,  eight  hours  constituted  a  full  day's 
work. 

Professor  Thorold  Rogers  puts  the  result  of  twenty 
years  of  patient  investigation  of  comparative  wages 
in  his  "History  of  Agriculture  and  Prices."  The 
sources  of  his  information  were  old  exchequer  bills, 
the  college  records,  the  manor  rolls,  the  farm  ac- 


60  The  Problem  of  the  Unemployed 

counts,  preserved  often  by  accident  in  libraries  and 
in  public  and  private  archives.  He  collected  thou- 
sands and  thousands  of  records  of  prices  actually 
paid  for  different  commodities,  and  he  gives  all  the 
facts  and  figures  showing  the  details  by  which  his 
averages  are  arrived  at.  The  accuracy  of  his  find- 
ings of  fact  on  all  important  matters  has  never  been 
impugned,  and  he  seems  to  be  sustained  by  all  au- 
thorities upon  the  subject.*  He  began  his  studies  as 
an  orthodox  economist  of  the  laissez-faire  school, 
opposed  to  trade  unions,  and  under  the  impression, 
evidently,  that  all  social  ills  would  cure  themselves. 
He  saw  no  necessity  for  the  discovery  of  the  cause 
of  undesirable  economic  conditions,  such  as  the  enor- 
mous increase  of  private  fortunes,  and  the  fact  that 
men  willing  to  work  are  often  unable  to  find  work, 
and  that  multitudes  of  workers  in  a  country  like 
England  are  in  a  condition  of  chronic  semi-starva- 
tion. 

The  following  extracts  are  taken  from  his  "Six 
Centuries  of  Work  and  Wages" : 

"I  have  stated  more  than  once  that  the  fif- 
teenth century  and  the  first  quarter  of  the  six- 
teenth were  the  golden  age  of  the  English  la- 
borer, if  we  are  to  interpret  the  wages  which  he 
earned  by  the  cost  of  the  necessaries  of  life." — 
p.  326. 

"Relatively  speaking,  the  working  man  of 
today  is  not  so  well  off  as  he  was  in  the  fifteenth 
century." — p.  355. 

In  summing  up  at  the  close  of  "Work  and  Wages," 

he  uses  the  following  language: 

"I  have  shown  that  from  the  earliest  recorded 

*Leone  Levi,  F.  S.  S. — History  of  British  Commerce. 
G.  R.  Porter — Progress  of  the  Nation. 


Effect  of  hnprovements  61 

annals,  through  nearly  three  centuries,  the  con- 
dition of  the  English  laborer  was  that  of  plenty 
and  hope ;  that  from  perfectly  intelligible  causes 
it  sunk  within  a  century  to  so  low  a  level  as  to 
make  the  workmen  practically  helpless,  and  that 
the  lowest  point  was  reached  just  about  the  out- 
break of  the  great  war  between  King  and  Par- 
liament. From  this  time  it  gradually  improved, 
till  in  the  first  half  of  the  eighteenth  century, 
though  still  far  below  the  level  of  the  fifteenth 
it  achieved  comparatively  plenty.  Then  it  be- 
gan to  sink  again,  and  the  workmen  experienced 
the  direst  misery  during  the  great  Continental 
war.  Latterly,  almost  within  our  own  memory 
and  knowledge,  it  has  experienced  a  slow  and 
partial  improvement." 

It  is  evident  that  the  percentage  of  increase  or  de- 
crease in  wages  in  America  in  the  past  fifty  years, 
taking  into  account  the  purchasing  power  of  the 
money  earned,  can  be  but  trifiing  at  most,  or  there 
would  be  no  such  differences  of  opinion  about  it;  and 
it  is  apparent,  especially  in  view  of  the  result  of  the 
investigation  made  by  Prof.  Rogers  and  others,  that 
so  far,  labor-saving  inventions  have  failed  to  raise 
the  wages  of  employees.  In  this  connection,  the  fact 
is  significant  that  the  trades  in  which  there  appears 
to  be  the  greatest  increase  in  wages  in  England  since 
the  beginning  of  the  last  century,  are  those  most 
strongly  dominated  by  labor  organizations.  This 
tends  to  show  that  the  rise  in  wages  in  England  dur- 
ing the  past  seventy-five  years  is  not  the  result  of 
causes  naturally  flowing  from  the  operation  of  the 
law  of  supply  and  demand  on  account  of  increased 
production  brought  about  by  modern  labor-saving 
machines,  but  from  combinations  of  working  men. 
As  shown  by  the  authorities  referred  to,  the  darkest 


62  The  Problem  of  the  Unemployed 

days  of  the  English  laborer  were  from  1780  to  1830 ; 
since  then  there  has  been  a  slow  but  steady  improve- 
ment in  his  condition,  but  during  this  period  of  im- 
provement the  great  labor  unions  of  England,  now 
the  most  powerful  in  the  world,  steadily  increased 
in  strength  and  efficiency.  Up  to  1824,  such  organ- 
izations were  illegal  and  were  often  sternly  sup- 
pressed by  law. 

While  there  is  some  difference  of  opinion  as  to 
whether  wages  of  employees  on  the  whole  are  slightly 
higher  or  slightly  lower,  now  than  say  fifty  years 
ago,  no  one  doubts  the  enormous  increase  of  wealth 
produced  by  labor-saving  inventions.  Neither  is 
there  room  for  doubt  that  the  average  increase  in 
the  power  of  the  employed  laborer  to  produce  wealth 
greatly  exceeds  the  increase,  if  any,  in  the  wages 
received  by  him;  the  only  question  being  as  to  the 
ratio  of  such  increase. 

The  laborer  of  today  often  produces  more  wealth 
in  an  hour  than  his  grandfather  did  in  a  week,  and 
instances  in  which  the  production  is  tenfold  greater 
are  almost  innumerable.  Six  or  eight  men  with  a 
modern  cotton  gin  will  separate  as  much  lint  from 
the  seed  and  bale  it,  as  several  thousand  could  in  the 
same  length  of  time  before  Whitney's  invention; 
while  improvements  in  spinning  and  weaving  enable 
a  single  laborer  now  to  do  what  was  once  the  tasl- 
of  hundreds.  Benjamin  Franklin  printed  one  hun 
dred  copies  of  his  paper  in  an  hour ;  today,  one  ma- 
chine in  an  hour  automatically  prints,  cuts,  counts, 
pastes,  and  labels  100,000  copies,  each  of  which  is  a 
hundred  times  greater  than  the  sheet  which  Frank- 
lin published.  With  a  planing  machine,  one  man 
does  the  work  of  thirty  planing  by  hand ;  and  as  to 


Effect  of  Improvements  63 

numberless  small  articles  like  tacks,  nails  and  screws, 
the  product  of  one  man's  work  exceeds  that  formerly 
produced  by  hundreds.  A  dozen  men  can  make  more 
flour,  including  the  raising  of  the  wheat,  than  a  thou- 
sand can  consume. 

It  is  impossible,  however,  to  ascertain  with  cer- 
tainty the  ratio  of  the  increase  in  the  wealth-produc- 
ing effectiveness  of  labor.  In  a  recent  magazine 
article,  it  was  gravely  asserted  that  on  an  average 
the  laborer  of  today  produces  fifty  times  as  much 
wealth  as  the  laborer  of  a  hundred  years  ago,  and  it 
is  not  uncommon  for  the  ratio  to  be  estimated  at  ten 
to  one ;  but  such  guesses  are  widely  extravagant.  The 
average  farmer  still  milks  his  cows,  makes  butter, 
looks  after  his  stock,  cuts  wood,  hauls  his  produce  to 
market,  feeds  chickens,  gathers  fruit  and  eggs,  raises 
vegetables,  builds  fences,  and  does  the  great  bulk  of 
his  work  without  the  aid  of  other  appliances  than 
those  in  use  when  Benjamin  Franklin  was  a  boy. 
And  this  is  largely  true  as  to  storekeepers,  clerks, 
accountants,  carpenters,  masons  and  the  building 
trades  generally;  and  so  also  as  to  cooks,  cabmen, 
waiters  and  housekeepers,  and  workers  in  scores  of 
other  lines  of  employment.  The  fact  is  that  half, 
if  not  three-fourths,  of  the  work  of  the  world  is  still 
done  with  the  tools  in  use  hundreds  of  years  ago. 

"The  census  returns  show  that  the  wealth  of  the 
country  ;;e/'  capita,  as  already  stated,  has  increased 
from  $308  in  1850  to  about  $1,800  in  1914,  a  six- 
fold increase  per  capita,  which  can  only  be  attrib- 
uted to  the  effect  of  labor-saving  improvements  and 
processes.*    If  it  be  assumed  that  the  aggregate  sav- 

♦Although    in    the    census,    land    is    improperly    classed    as 


64  The  Problem  of  the  Unemployed 

ings  of  a  community  or  nation  increase  in  the  same 
proportion  as  its  aggregate  increase  of  incomes,  then 
the  conclusion  can  be  drawn  from  the  figures  men- 
tioned above  that  improvements  in  labor-saving  pro- 
cesses have,  since  1850,  increased  the  wealth-produc- 
ing powers  of  labor  six-fold,  and  this  is  doubtless  ap- 
proximately the  fact.  No  one  will  contend,  however, 
that  there  has  been  a  six-fold  increase  in  wages  dur- 
ing the  period  referred  to  above.  Hence  from  the 
facts  bearing  upon  the  subject,  the  theory  that  under 
existing  conditions  and  under  the  operation  of  the 
law  of  supply  and  demand,  labor-saving  inventions 
do  not  directly  increase  wages,  is  amply  sustained  by 
experience.  The  second  question  is  therefore  an- 
swered in  the  negative. 

That  labor-saving  inventions  in  themselves,  as  well 
as  increase  of  population,  directly  increase  the  value 
of  land  and  raise  rent,  is  equally  apparent.  It  will 
be  found  that  the  third  question  must  be  answered  in 
the  affirmative.    To  illustrate: 

Electricity,  the  trolley  line  and  the  automobile 
have  superseded  the  horse  in  the  operation  of  street 
cars.  Land  miles  away  has  been  brought  in  point  of 
time  to  the  very  centers  of  cities  and  thus  greatly 
increased  in  value,  and  rents  on  such  land  have  ad- 
vanced accordingly.  By  the  aid  of  barbed  wire  the 
cheap  lands  of  the  Southwest  in  the  timberless  dis- 
tricts have  been  fenced  for  a  fraction  of  what  it 
would  otherwise  have  cost,  and  for  this  reason  have 
been  rendered  more  attractive  to  the  homeseeker, 
and  the  price  of  the  land  has  on  this  account  in- 
creased.   Improvements  in  pumping  water  in  great 

wealth,  the  ratio  of  the  increase  of  wealth  per  capita  is  doubt- 
less correctly  shown. 


Effect  of  Improvements  65 

quantities,  and  also  in  harvesting  processes,  were 
applied  some  years  ago  to  the  cultivation  of  rice  on 
the  sour,  flat  prairies  of  Southern  Texas,  and  these 
lands,  within  two  or  three  years,  doubled  and  quad- 
rupled in  value.  Improved  highways,  telephone, 
light,  water  and  street  car  service,  all  combine  to 
make  the  land  in  connection  with  which  such  ad- 
vantages can  be  enjoyed,  more  desirable,  and  the 
fact  of  its  being  more  desirable  adds  to  its  selling 
price,  and  increases  the  rent  which  must  be  paid 
for  the  privilege  of  using  it. 

So,  also,  good  neighbors,  good  schools  and  good 
government  make  land  more  attractive  and  increase 
rents  accordingly.  In  one  of  the  Southern  cities,  the 
sale  of  intoxicating  liquors  was  prohibited  for  a 
number  of  years.  In  commenting  upon  the  results 
of  the  experiment,  one  of  the  local  papers  stated  that 
much  of  the  money  which  the  working  men  of  the 
town  formerly  threw  away  in  saloons  was  being 
invested  by  them  in  building  lots,  and  the  great  im- 
provement in  the  local  real  estate  market  was  attrib- 
utable to  prohibition.  This  would  naturally  be  the 
case.  The  virtues  of  temperance  and  frugality  can- 
not increase  rates  of  interest  or  raise  wages,  but  they 
can  and  do  increase  rent  and  the  values  of  land  for 
two  reasons ;  first,  because  a  community  inhabited  by 
people  of  sufficient  intelligence,  self-respect  and  firm- 
ness of  character  to  practice  such  virtues  is  a  desir- 
able one  in  which  to  live  and  raise  one's  family,  and, 
other  things  being  equal,  population  will  be  attracted 
to  it,  and  land  values  and  rents  will,  as  a  conse- 
quence, be  increased.  Second,  because  the  more 
wealth  the  people  of  a  community  save,  over  living 
expenses,  the  more  they  have  to  invest  in  land,  a.-i 


66  The  Problem  of  the  Unemployed 

well  as  in  other  things,  and  this  will  create  a  greater 
demand  for  land,  and  this  demand  will  increase  the 
price. 

That  not  only  increase  of  population  but  every- 
thing which  adds  to  the  efficiency  of  labor  and  im- 
proves the  conditions  under  which  men  live,  simply 
adds  in  the  long  run  and  in  the  main,  to  the  value  of 
land  and  increases  the  income  of  those  whose  inter- 
ests as  land  owners  exceed  their  interest  as  laborers 
and  capitalists,  will  be  made  more  clearly  apparent 
in  subsequent  pages. 

The  conclusion  stated  above,  that  land  owners,  and 
only  a  portion  of  them,  appear  on  the  whole  and  in 
the  long  run  to  be  the  beneficiaries  of  progress,  may 
not  be  assented  to  except  upon  careful  reflection,  nor 
perhaps  until  the  end  of  the  discussion  is  reached. 
It  may  be  claimed,  for  instance,  that  there  are  no 
indications  of  farmers,  who  are  the  most  numerous 
of  the  land-owning  class,  receiving  any  great  amount 
of  the  wealth  resulting  from  improvements  in  labor- 
saving  machinery.  The  portion  of  the  wealth  pro- 
duced which  land  receives,  however,  depends  not 
upon  the  amount  or  area  of  land,  but  upon  its  value, 
and  most  of  the  land  in  cultivation  is  of  little  value 
compared  with  that  of  urban  lands  and  lands  held 
for  other  than  agricultural  purposes.  What  is  really- 
claimed,  however,  is  not  that  all  wealth  produced  is 
divided  among  the  factors  entering  into  its  produc- 
tion, but  that  as  to  the  portion  of  it  thus  divided,  the 
part  going  to  land  is  increased  by  labor-saving  ma- 
chinery and  progress  of  every  character,  while  the 
portion  going  to  capital  and  labor  is  not  thus  in- 
creased from  the  same  cause,  and  that  hence  the 
land  owner,  and  not  the  capitalist  or  the  laborer,  gets 


Effect  of  Improvements  67 

the  benefit  of  progress.  Probably  four-fifths  of  those 
engaged  in  agricultural  pursuits  have  greater  in- 
terests as  capitalists  and  laborers  than  as  land  own- 
ers, and  accordingly  it  is  not  to  be  expected  that 
farmers  as  a  class  would  be  greatly  benefited  by 
causes  which  simply  increase  the  value  of  land  with- 
out increasing  interest  or  wages. 

Again,  the  fact  that  immense  private  fortunes  have 
been  accumulated  during  the  present  generation  oth- 
erwise than  from  an  increase  in  land  values,  may 
also  be  given  as  a  reason  for  doubting  the  conclusion 
that  land  owners  in  the  end  get  almost  the  entire 
benefit  of  material  progress.  These  newly,  enor- 
mously rich,  however,  who  have  appeared  simultan- 
eously with  the  recent  wonderful  improvements  in 
labor-saving  appliances,  and  whose  incomes  are  only 
in  small  part,  comparatively,  made  up  of  rent  or  in- 
terest or  wages,  belong  to  an  exceptional  class,  enjoy- 
ing incomes  for  which  no  equivalent  in  labor  or  the 
use  of  land  or  capital  is  given.  To  this  class  must  be 
assigned  those  whose  incomes  constitute  exceptions 
to  the  natural  law  which  controls  the  distribution  of 
wealth,  and  in  the  main  arise  from  disobedience  of  it. 

The  ratio  of  the  division  of  wealth  between  the 
factors  of  production,  land,  capital  and  labor,  is  not 
fixed,  but  is  determined  by  the  law  of  supply  and  de- 
mand. While  the  number  of  laborers  and  the  amount 
of  capital  is  constantly  increasing  as  well  as  the  pro- 
ductive capacity  of  the  laborer,  land  remains  a  fixed 
quantity,  and  rent,  or  the  value  of  land,  increases  be- 
cause the  supply  of  land  cannot  increase,  hence  the 
ratio  of  the  division  of  the  product  is  constantly 
changing  in  favor  of  land.  ..  ,  ._,. 


68  The  Problem  of  the  VnemplGyed 

The  further  discussion  of  the  subject,  therefore, 
will  be  carried  on  upon  the  assumption  that  improve- 
ments in  labor-saving  processes  and  human  progress 
generally,  in  the  long  run,  increase  the  value  of  land, 
but  do  not  naturally  increase  the  wages  or  rates  of 
interest.  The  truth  of  this  assumption  will  be  con- 
clusively established,  not  only  by  reference  to  addi- 
tional facts,  but  by  showing  that,  in  the  very  nature 
of  things,  under  existing  conditions,  neither  wages 
nor  rates  of  interest  can  naturally  advance,  even 
though  improvements  were  to  be  carried  so  far  as 
finally  to  enable  the  laborer  to  produce  in  an  hour 
what  now  requires  the  work  of  years.  The  assertion 
just  made  has  reference  to  the  natural  effect  on 
wages  and  interest  of  human  progress  generally.  In 
the  contingency  mentioned,  other  factors  of  the  char- 
acter referred  to  by  Mr.  Ghent  in  his  "Benevolent 
Feudalism,"  would  doubtless  bring  about  a  compara- 
tively insignificant  increase  in  wages. 


CHAPTER  VI. 
THE  ALL  IMPORTANT  QUESTION. 

WHY  DO   NOT  IMPROVEMENTS   IN   LABOR-SAVING   PRO- 
CESSES NATURALLY  INCREASE  WAGES.? 

IT  having  been  shown  that  increase  of  population 
and  improvements  in  morals,  general  intelligence 
and  government,  as  well  as  in  labor-saving  processes, 
raise  the  value  of  land  and  increase  the  price  which 
must  be  paid  for  the  privilege  of  using  it  without  in- 
creasing interest,  or  the  wages  of  the  great  mass  of 
laborers,  in  anything  like  the  same  proportion,  if  at 
all,  the  reason  for  this  fact  is  next  to  be  considered. 

In  the  first  place,  wages  do  not  naturally  rise  with 
the  increasing  wealth-producing  power  of  the  la- 
borer, simply  because  there  are  not  enough  jobs  to 
go  around. 

The  assertion  is  often  made  that  any  laborer  who 
really  wants  work  can  always  get  it,  the  inference 
being  that  it  is  only  the  indolent  and  inefiicient  who 
ever  fail  of  having  employment.  It  is  doubtless  true 
that  the  working  man  who,  by  greater  faithfulness 
and  efficiency,  in  effect  gives  more  labor  for  the 
same  wages,  and  in  this  way  unconsciously  under- 
bids his  fellows,  is  always  reasonably  sure  of  employ- 
ment, even  in  times  of  depression ;  but  it  by  no  means 
follows  that,  if  all  working  men  were  equally  as 
faithful  and  efficient,  all  would  be  equally  as  sure 
of  employment  as  the  one  who  is  now  exceptionally 
so.    Such  improvements  in  faithfulness  and  efficiency 


70  The  Problem  of  the  Unemployed 

on  the  part  of  all  laborers  would  simply  increase  the 
amount  of  wealth  produced  by  them;  but  this  is 
what  labor-saving  machinery  accomplishes.  Why, 
then,  should  increased  efficiency  resulting  from  a 
general  improvement  in  the  character  of  laborers 
do  more?  Both  would  result  in  an  increase  of  the 
output;  but  we  have  seen  that  an  increase  in  the 
amount  of  wealth  which  laborers  produce  does  not 
necessarily  result  in  an  increase  of  wages,  otherwise 
labor-saving  machinery  would  raise  wages. 

In  any  event,  however,  whether  much  or  little  of 
the  idleness  on  the  part  of  laborers  is  voluntary  or 
not,  large  numbers  of  them  are  always  eager  for  the 
places  of  those  who  have  steady  employment.  This 
is  shown  by  the  fact  that  whenever  a  strike  occurs, 
some  men  are  always  ready  to  take  the  places  of 
strikers,  and  many  more  are  only  deterred  from  do- 
ing so  by  moral  or  physical  force  exerted  by  labor 
organizations.  It  is  also  the  universal  testimony  of 
the  managers  of  business  establishments  and  em- 
ployment agencies,  and  of  those  who  occasionally 
advertise  for  labor,  that  in  all  lines  of  employment, 
from  the  highest  to  the  lowest,  men  are  always  anx- 
ious for  jobs,  either  because  they  are  wholly  out  of 
employment  or  but  partially  employed,  or  because 
they  feel  that  they  are  underpaid  in  the  positions 
held  by  them.  The  numerous  newspaper  accounts  of 
men  and  women  who  commit  suicide  for  want  of 
employment  indicate  a  real  scarcity  of  jobs.  Again, 
how  is  it  otherwise  possible  to  account  for  the  appar- 
ent heartlessness  of  thousands  of  parents  in  this 
country  who  consign  their  own  children,  sometimes 
under  ten  years  of  age,  to  the  monotonous  and  health- 
destroying  slavery  of  mills,  sweat-shops,  chemical 


The  All  Important  Question  71 

works,  coal  breakers  and  match  factories?  And 
again,  what  other  explanation  can  be  given  of  the 
fact  that  railroad  companies,  even  though  fixing  the 
age  limit  of  new  employees  at  forty-five  years,  and 
sometimes  under,  and  subjecting  them  to  severe  phys- 
ical examinations,  never  fail  to  have  on  hand  long 
lists  of  applications  for  employment  from  men  both 
competent  and  eligible? 

Complaint  of  a  scarcity  of  labor  is  sometimes 
heard,  however,  in  this  country,  and  in  many  quar- 
ters the  Chinese  exclusion  act  is  deprecated.  But 
investigation  will  invariablj^  shovv'  that  there  is  never 
any  scarcity  of  applicants  for  positions  which  are 
permanent,  when  the  wages  are  sufficient  to  enable 
the  employee  to  live  according  to  American  stand- 
ards. The  American  laborer  naturally  objects  to  be- 
ing forced  to  submit  to  the  competition  of  those  of  his 
own  calling  from  the  South  of  Europe.  To  accept 
employment  for  wages  which  v/ould  imply  the  lower- 
ing of  the  standard  of  living  of  his  class  would  not 
increase  the  demand  for  labor.  It  would  simply  tend 
to  lower  the  wages  of  all  laborers.  The  self-respecting 
workingman,  therefore,  often  rightfully  refuses  to 
accept  employment  at  reduced  wages  until  compelled 
to  do  so  by  absolute  want;  but  this  does  not  imply 
any  scarcity  of  labor  or  an  abundance  of  opportuni- 
ties for  employment. 

The  tramp  is  often  thoughtlessly  referred  to  in  sup- 
port of  the  claim  that  idleness  on  the  part  of  laborers 
who  are  out  of  employment  is  not  involuntary.  But 
many  who  are  classed  as  tramps  will  work  when  they 
can  get  work,  otherwise  why  is  it  that  tramps  are  so 
much  more  plentiful  in  periods  of  industrial  depres- 
sion than  in  prosperous  times  ?    The  confirmed  tramp 


72  The  Problem  of  the  Unemployed 

is  usually  a  laborer  who,  by  being  compelled  to  travel 
and  beg  for  work,  has  lost  his  self-respect.  Prior  to 
1850,  there  was  little  complaint  of  a  scarcity  of  jobs 
in  the  United  States,  and  up  to  that  time  there  were 
practically  no  tramps  or  beggars  in  this  country. 

Occasionally,  as  in  harvest  times,  there  may  be  a 
temporary  scarcity  of  help  in  some  localities,  or 
laborers  may  be  unwilling  to  work  for  the  wages 
offered  when  the  employment  is  but  temporary.  A 
slight  increase  in  wages  above  the  average,  espe- 
cially when  permanency  of  employment  is  assured, 
will  always  fill  to  overflowing  the  labor  market  of 
the  locality  where  such  wages  are  paid,  and  render 
any  further  advance  impossible.  The  law  of  supply 
and  demand  regulates  prices  paid  for  labor,  just  as 
it  regulates  prices  paid  for  commodities,  and  as  com- 
binations of  manufacturers  may  sustain  or  raise 
the  prices  of  commodities,  so  combinations  of  work- 
ingmen  may  sustain  or  raise  the  prices  of  certain 
kinds  of  labor.  But  in  neither  case  is  there  any  es- 
cape from  the  pressure  of  the  lav/  of  supply  and  de- 
mand, and,  in  most  cases,  it  overcomes  all  resistance 
and  forces  the  price  of  labor  as  well  as  the  price  of 
commodities  to  the  minimum  point. 

The  claim  that  at  all  times  large  numbers  of  work- 
ers in  the  United  States  are  unwillingly  idle  is  not  a 
mere  matter  of  opinion,  since  it  is  established  from 
data  collected  by  the  census  enumerators  and  shown 
in  the  census  reports.  And  here  again  reference  is 
made  to  the  optimistic  Carroll  D.  Wright,  who  states 
that  on  an  average  about  5%  of  the  workers  of  the 
country  are  at  all  times  unable  to  obtain  employ- 
ment.* 

*"Practical  Sociology,"  p.  243. 


The  All  Importayit  Question  73 

A  moment's  reflection  will  satisfy  one  that  so  long 
as  5%,  or  even  1%,  of  the  workers  in  any  line  of 
employment  are  unemployed,  wages  in  such  line  can 
never  naturally  advance,  though  they  may  be  slightly 
lifted  artificially  by  the  fear  of  strikes  and  from 
other  causes.  Why  should  A  pay  B  higher  wages, 
when  C  stands  ready  to  do  the  same  work  for  the 
same  or  even  lower  wages?  The  one  man  in  twenty 
out  of  employment  and  seeking  employment  is  a  con- 
stant menace  to  all  the  other  nineteen  who  are 
employed.  His  offer  to  work  for  lower  wages  may 
result  in  lowering  the  wages  of  the  other  nineteen, 
even  though  he  fail  of  getting  employment  himself. 

A  small  minority  of  laborers,  unable  to  get  work 
or  finding  difficulty  in  obtaining  it,  must  necessarily 
prevent  wages  from  rising,  even  though  the  over- 
whelming majority  are  regularly  employed.  If  there 
are  jobs  for  only  ninety-five  laborers  out  of  a  hun- 
dred, the  five  unemployed  are  always  ready  to  take 
the  places  of  the  employed,  and  the  effect  constantly 
of  an  unemployed  or  but  partially  employed  five  per 
cent.,  or  even  one  per  cent.,  anxious  to  get  the  places 
of  some  of  the  employed  ninety-nine  per  cent.,  will 
inevitably  prevent  wages  from  naturally  advancing, 
no  m.atter  what  may  be  the  increased  amount  of 
wealth  produced.  Nor  would  it  make  any  difference 
whether  the  increase  in  production  resulted  from 
greater  faithfulness  and  energy  of  wage-earners,  or 
from  improvements  in  labor-saving  appliances 
operated  by  them.  On  the  other  hand,  if  there  were 
always  jobs  for  a  hundred  and  five  or  even  a  hundred 
and  one  laborers,  when  there  were  only  one  hundred 
to  be  had,  so  that  at  all  times  men  wanting  work 


74  The  Problem  of  the  Unemployed 

could  get  it  without  difficulty,  wages  would  always 
tend  to  rise. 

It  is  clear  that  under  present  conditions  wages 
cannot  rise  as  the  natural  result  of  progress  in  labor- 
saving  appliances,  even  though  the  wealth  which 
the  laborer  produces  should  be  increased  thereby 
ten-fold,  or,  for  that  matter,  a  hundred  or  even  a 
thousand-fold.  It  is  equally  true  that  there  can  be 
no  increase  in  wages  from  natural  causes  until  every 
man  wanting  work  can  readily  get  work,  and  that 
too  without  having  to  regard  it  as  a  favor  to  himself 
to  be  furnished  with  work.  The  solution  of  the  prob- 
lem of  the  unemployed,  therefore,  involves  the  study 
of  conditions  affecting  the  demand  for  labor,  and 
this  includes  a  consideration  of  the  obstacles  to  the 
employment  of  capital  and  labor.  It  must  logically 
follow,  therefore,  if  there  are  artificial  obstacles  to 
such  employment,  then  in  the  fact  of  the  existence 
of  such  obstacles  will  be  found  a  reason,  if  not  the 
reason,  for  the  lack  of  the  full  employment  of  labor. 

The  scarcity  of  jobs  referred  to  is  not  attributable 
to  improvements  in  labor-saving  machinery. 

To  lessen  the  number  of  jobs  means  to  lessen  the 
demand  for  labor  and  lower  wages;  to  increase  the 
number  of  jobs  means  to  increase  the  dem.and  for 
labor  and  raise  wages.  Jobs,  therefore,  are  most 
plentiful  in  proportion  to  population  in  countries  in 
which  Vv'ages  are  highest.  It  is  a  significant  fact, 
also,  that  in  such  countries,  fortunes  are  most  rapid- 
ly accumulated,  which  tends  to  show  that  employers 
and  business  men  as  a  class  have  nothing  to  gain 
from  a  lower  scale  of  wages.  In  the  United  States, 
Canada,  and  the  Australian  Colonies,  where  land  is 
still  comparatively  cheap,  wages  are  higher  than  any- 


The  All  Important  Question  75 

where  else  in  the  world,  yet  in  no  other  countries  are 
labor-saving  machines  more  extensively  used.  In 
fact,  the  world  over,  other  things  being  equal,  wages 
are  highest  in  the  countries  using  the  greatest 
amount  of  labor-saving  machinery,  and  lowest  in 
countries  using  the  least  amount.  Besides,  the  com- 
plaint of  the  unemployed  in  all  the  thickly  settled 
countries  of  Europe  was  as  loud  and  bitter  before 
the  introduction  of  modern  labor-saving  machinery 
as  at  present. 

There  is  no  reason  in  the  nature  of  things,  why  la- 
bor-saving appliances  should  reduce  wages.  This  is 
apparent  from  the  following  illustration:  I  have 
four  dollars  with  which  to  buy  a  pair  of  shoes.  By 
means  of  a  labor-saving  invention,  one  man  becomes 
able  to  do  the  work  of  two  in  the  making  of  shoes. 
The  price  of  a  pair  of  shoes,  therefore,  is  reduced 
to  two  dollars,  and  many  shoe-makers  perhaps  are 
forced  to  abandon  the  making  of  shoes.  I  pay 
two  dollars  for  the  shoes,  but  now  I  have  two  dol- 
lars left  to  spend  for  something  else,  which  but  for 
this  invention  would  have  been  spent  for  the  shoes, 
and  in  the  buying  of  two  dollars  worth  more  of 
something  else,  I  will  have  increased  the  demand 
for  other  kinds  of  labor  to  the  same  extent  I  would 
have  increased  the  demand  for  the  labor  of  shoe- 
makers, had  the  two  dollars  been  spent  for  shoes. 
While  the  adoption  of  labor-saving  processes  pro- 
duces displacements  of  labor  and  hardships  to  in- 
dividual laborers,  no  diminution  in  the  ultimate 
demand  for  labor  can  result  therefrom.  It  is  thus 
evident,  from  theory  as  well  as  experience,  that 
the  scarcity  of  jobs  cannot  be  attributed  to  labor- 
saving  processes. 


76  The  Problem  of  the  Unemployed 

Nor  is  the  scarcity  of  jobs  caused  by  mere  increase 
of  population  or  by  any  real  scarcity  of  land. 

A  moment's  reflection  must  satisfy  one  that  there 
is  no  real  scarcity  of  land.  More  than  half  the  dry 
land  of  the  world,  suitable  for  agricultural  purposes, 
is  as  yet  untouched  by  the  hand  of  man,  and  im- 
mense areas  of  virgin  soil  of  unsurpassed  fertility 
are  still  to  be  found  in  nearly  every  country,  and 
especially  in  South  America,  Africa,  Siberia  and 
Australia,  The  State  of  Texas  alone  could  easily 
produce  food  and  clothing  for  all  the  inhabitants  of 
France,  for  it  has  a  larger  area  and  its  soil  is  equally 
productive.  It  is  estimated  that  less  than  two  acres 
of  land  of  average  fertility,  when  cultivated  with 
reasonable  skill  and  diligence,  is  amply  sufficient, 
with  the  least  expenditure  of  labor,  to  produce  in 
abundance  the  raw  material  necessary  for  the  sus- 
tenance of  a  human  being.  Under  an  intensive  and 
scientific  system  of  agriculture,  such  as  density  of 
population  would  encourage,  doubtless  a  single  acre, 
or  even  half  an  acre,  would  be  amply  sufficient.  In 
Japan  the  land  in  cultivation  amounts  to  less  than 
one  acre  to  each  inhabitant,  and  its  entire  cultivated 
area  with  its  foi*ty-five  million  people,  is  less  than  the 
area  of  Illinois.  More  than  half  the  present  popula- 
tion of  the  world  could  easily  be  sustained  within  the 
limits  of  the  United  States  alone.  More  than  one- 
fourth  of  the  lands  of  Europe  are  unused.  The  uncul- 
tivated or  but  partially  cultivated  lands  of  thickly  set- 
tled Great  Britain,  which  are  now  held  in  compara- 
tive idleness,  including  the  millions  of  acres  devoted 
to  private  parks  and  used  as  game  preserves,  as  well 
as  the  hundreds  of  thousands  of  acres  of  unused  land 
in  cities  and  towns  and  their  suburbs,  are  capable  of 


The  All  Important  Question  11 

producing  with  ease  all  the  important  food  supplies 
imported  into  that  kingdom.  And  the  use  of  these 
lands  for  agricultural  purposes  is  prevented  only  by 
the  whim  of  owners  and  by  the  amount  of  the  pur- 
chase price  demanded.  Modern  means  of  transport- 
ation and  facilities  for  exchanging  the  products  of 
labor,  make  the  unused  lands  of  countries  thousands 
of  miles  distant  in  effect  a  part  of  the  unused  lands 
of  England,  and  the  employment  of  additional  labor- 
ers on  such  lands  would  enable  the  English  working 
man  to  exchange  his  products  for  food  produced  by 
them. 

In  Greater  New  York  there  are  tens  of  thousands 
of  acres  of  land  wholly  unused,  including  more  than 
one-third  the  area  of  the  city,  there  being  within 
the  corporate  limits  of  the  city,  on  an  average,  twen- 
ty-seven people  to  the  acre,  although  in  the  congested 
tenement  districts  the  population  may  exceed  a  thou- 
sand to  the  acre.  In  the  United  States,  four  acres 
out  of  five  are  in  fact  unused  or  but  partially  used. 
When  land  is  referred  to  as  being  but  partially  used, 
it  is  meant  that  it  is  not  so  used  as  to  produce  the 
greatest  amount  of  wealth  with  the  least  expenditure 
of  labor. 

And  so  in  all  countries  are  to  be  found,  on  every 
hand,  idle  lands  and  unused  coal  beds  and  mineral 
deposits,  from  which  profitable  returns  to  capital 
and  labor  could  be  obtained  but  for  the  price  required 
for  the  privilege  of  using  them.  Such  lands  are  not 
held  out  of  use  because  of  any  lack  of  fertility  or  on 
account  of  distance  from  markets;  they  are  often 
to  be  found  within  and  at  the  very  gates  of  cities  and 
towns,  and  in  the  midst  of  highly  developed  farming 
communities.    So  long  as  lands  of  this  character  re- 


78"  The  Problem  of  the  Unemployed 

main  unused,  or  but  partially  used,  neither  the  theory 
of  Malthus  nor  the  law  of  diminishing  returns  can 
have  any  real  or  necessary  application. 

Suppose  three  acres  on  an  average  to  be  required 
for  the  comfortable  maintenance  of  each  human  be- 
ing under  present  methods  of  cultivation.  In  the 
United  States,  after  deducting  as  waste  land  one- 
fourth  of  the  area  of  the  country,  there  would  re- 
main twenty-one  acres  per  capita,  or  eighteen  acres 
in  excess  of  the  necessary  number.  If  the  population 
were  doubled,  there  would  be  an  excess  of  fifteen 
acres,  and  if  trebled,  an  excess  of  twelve  acres,  over 
and  above  the  amount  required  for  the  support  of 
the  entire  population,  and  so  on.  In  point  of  fact, 
population  in  this  country  cannot  begin  to  crowd  the 
means  of  subsistence  for  centuries  yet  to  come,  even 
should  it  continue  to  increase  in  the  future  as  rapid- 
ly as  in  the  past.  So  far  as  actual  experience  is  con- 
cerned, population  has  never  become  dense  enough 
in  any  country  to  result  in  the  full  employment,  or 
anything  like  the  full  employment,  of  the  lands  of 
such  country.  And  idle  men  and  women  have  died 
of  starvation  in  thickly  settled  communities,  in  the 
midst  of  vast  areas  of  unused  or  but  partially  used 
lands. 

When  the  civilized  world  was  appealed  to  a  few 
years  ago  to  assist  millions  who  were  starving  in 
India  on  account  of  a  failure  of  crops  in  certain  sec- 
tions of  that  country,  contributions  in  money  were 
wanted  and  not  shiploads  of  wheat,  as  some  mis- 
taken philanthropists  supposed.  There  was  an 
abundance  of  food  in  India,  and  the  wholesale  price 
of  it  scarcely  advanced  at  all.  People  starved,  not 
because  there  was  no  food,  but  because  they  could 


The  All  Important  Question  79 

not  get  employment.  The  same  was  the  case  in  Ire- 
land when  the  potato  crop  failed  in  1845.  Food, 
with  the  exception  of  potatoes,  was  about  as  cheap 
as  ever,  and  there  was  plenty  of  it  on  the  island 
or  within  easy  reach.  All  the  starving  populace 
wanted  was  employment.  During  that  period  of  dis- 
tress, in  which  tens  of  thousands  were  permitted  to 
starve  to  death,  the  vessels  which  crossed  to  Eng- 
land were  loaded  down  as  usual  with  sheep,  cattle, 
butter  and  eggs  and  the  miscellaneous  products  of 
the  farms,  sold  for  shipment  abroad  to  raise  money 
due  as  rent  to  absent  landlords. 

It  is  not  necessary  to  take  up  the  time  of  the  reader 
in  a  discussion  of  the  Malthusian  theory  of  increase 
in  population.  It  is  now  discredited  in  all  quarters. 
The  fallacy,  if  not  the  absurdity  of  it,  seems  to  have 
been  admitted,  tacitly  or  otherwise,  by  all  economic 
writers  since  Henry  George's  masterly  treatment  of 
the  subject  in  Progress  and  Poverty. 

Every  man  comes  into  the  world  with  two  hands 
with  which  to  work  and  supply  his  wants.  If  cast 
away  upon  an  uninhabited  but  fertile  island,  he  could 
make  a  generous  living  with  no  other  capital  than  an 
ax,  a  hoe  and  a  spade.  In  every  civilized  community 
the  unemployed  man  can  always  find  within  a  few 
minutes,  or  at  most  a  few  hours  travel,  an  abundance 
of  unused  land  on  which,  if  he  had  free  access  to  it, 
he  could  make  a  living  more  easily  than  the  castaway 
referred  to,  yet  he  is  often  compelled  to  fold  his  arms 
and  sit  in  idleness  and  suffer  for  want  of  food  in  the 
midst  of  unlimited  unused  natural  opportunities  for 
employment. 

When  men  starve  for  want  of  work,  it  cannot  be 
because  of  the  niggardliness  of  nature.    Must  it  not 


80  The  Problem  of  the  Unemployed 

be  because  of  the  mal-adjustment  of  the  forces  of 
government? 

With  an  abundance  of  unused  land,  freely  avail- 
able to  capital  and  labor,  growth  of  population  in  it- 
self would  render  the  employment  of  labor  more 
profitable,  and  increase  rather  than  lessen  the  de- 
mand for  labor.  Take  the  case  of  land  a  few  miles 
from  the  center  of  a  thriving  village.  As  population 
increases,  macadamized  roads,  telephone  and  trolley 
car  service,  good  schools  and  many  other  public  utili- 
ties become  available  to  the  laborer  employed  in  cul- 
tivating it.  Better  markets  spring  up  close  at  hand, 
and  this  makes  his  labor  more  effective,  and  in  num- 
berless ways  co-operation  with  nearby  neighbors 
saves  labor  and  increases  the  products  of  his  indus- 
try. When  the  pioneer  settles  in  the  wilderness,  he 
can  make  little  more  than  a  bare  living,  no  matter 
how  fertile  the  soil,  for  he  must  be  his  own  jack  of 
all  trades.  At  every  step  he  misses  the  help  and 
assistance  which  comes  from  co-operation  with  oth- 
ers and  the  division  of  industry.  When  thousands 
have  settled  around  him,  then,  in  numberless  in- 
stances, he  saves  energy  formerly  frittered  away  for 
small  returns,  and  the  efficiency  of  his  labor  is  im- 
mensely increased. 

Eighty  years  ago,  a  few  hundred  families  of  Mor- 
mons pushed  out  into  the  wilderness,  crossed  the 
Rocky  Mountains,  and  settling  on  free  land  fifteen 
hundred  miles  beyond  civilization,  founded  Salt  Lake 
City.  The  capital  which  they  carried  with  them  did 
not  average  one  hundred  dollars  to  the  family,  and 
was  represented  only  by  teams  and  a  few  agricul- 
tural and  household  implements.  Where  but  ten 
families  would  have  failed,  hundreds  of  families  sue- 


The  All  Important  Question  81 

ceeded.  Unaided  by  outsiders,  they  quickly  brought 
an  abundance  of  capital  of  their  own  into  existence. 
They  constructed  roads  and  irrigation  canals  and 
ditches,  and  provided  for  other  public  utilities  and 
diversified  their  industries.  In  the  saving  of  labor 
resulting  from  co-operation  of  a  large  community 
is  the  explanation  in  great  part  of  the  prosperity  and 
success  which  so  speedily  rewarded  their  efforts.  It 
must  be  evident,  on  reflection  at  least,  that  so  long  as 
there  was  an  abundance  of  unused  lands  in  the  very 
midst  of  the  Mormon  community,  free  of  cost  to  the 
first  comer  who  desired  to  use  it,  increase  of  popula- 
tion would  tend  to  increase  the  demand  for  labor  in- 
stead of  lessening  it,  because  of  the  inviting  fields  for 
the  investment  of  capital  in  the  employment  of  labor 
which  these  unused  lands  would  afford,  situated  as 
they  would  be  on  good  roads,  in  congenial  neighbor- 
hoods, and  served  by  irrigation  ditches  already  con- 
structed. 

While  free  land  may  seem  an  idle  dream,  the  effect 
of  it  must  nevertheless  be  considered  in  order  to 
ascertain  the  laws  which  control  the  distribution  of 
wealth.  Thus,  given  an  abundance  of  raw  material 
— of  land,  freely  available — increase  of  population 
cannot  lessen  the  demands  for  the  product  of  labor, 
since  as  population  increases,  consumption  also  in- 
creases, and  with  increase  of  consumption  will  follow 
in  the  same  ratio  an  increased  demand  for  labor. 

It  seems,  therefore,  to  be  demonstrable  that 
neither  a  real  scarcity  of  land,  nor  the  increase  of 
population,  nor  improvements  in  labor-saving  pro- 
cesses, can  be  assigned  as  the  reason  for  involuntary 
idleness,  and  for  the  failure  of  wages  to  advance 
naturally  in  proportion  to  the  increasing  wealth-pro- 


82  The  Problem  of  the  Unemployed 

ducing  efficiency  of  the  laborer.  As  to  whether  capi- 
tal increases  as  rapidly  as  necessary  for  the  full  em- 
ployment of  labor  will  be  considered  in  subsequent 
chapters. 


CHAPTER  VII. 

OBSTACLES  TO  EMPLOYMENT  OF  CAPITAL  AND  LaBOR. 

AGRICULTURE  is  the  primary  industry,  and 
most  important  of  all  industries.  About  one- 
third  of  all  laborers  in  the  United  States  are  engaged 
in  producing  wealth  directly  from  the  soil.  It  is  the 
occupation  in  which  the  workman  most  easily  learns 
to  do  the  work  required  of  him,  and  to  which  any 
laborer,  whether  skilled  or  otherwise,  can  quickly 
adapt  himself.  Under  favorable  conditions,  it  is 
attractive  alike  to  the  man  with  small  means  or  large 
means,  to  the  inexperienced  as  well  as  the  experi- 
enced, and  to  the  ignorant  as  well  as  the  intelligent. 

The  wages  of  agricultural  laborers  furnishes  the 
standard  which  gauges,  to  a  large  extent,  the  wages 
of  all  laborers.  If  wages  on  farms  are  high,  wages 
in  other  lines  of  employment  will  be  high  also,  since 
a  demand  for  agricultural  labor  at  high  wages  will 
retain  labor  upon  farms  and  even  attract  it  from 
cities  and  towns,  and  thus  increase  the  demand  for 
labor  in  other  than  agricultural  pursuits. 

In  the  settlement  of  new  countries  farmers  come 
first,  and  after  them  follow  mechanics  and  mer- 
chants. Farmers  and  miners  must  first  be  employed 
in  the  production  of  the  raw  material,  before  those 
who  work  in  stores  and  factories  can  have  employ- 
ment. The  business  of  the  world,  with  all  its  ramifi- 
cations and  subdivided  branches  of  production  and 
distribution,  is  based  primarily  on  labor  applied  di- 


K4  The  Problem  of  the  Unemployed 

rectly  to  the  soil.  It  is  evident  that  anything  which 
obstructs  the  access  of  capital  and  labor  to  land  is 
an  obstacle  to  employment,  and  it  may  be  sufficient 
to  account  for  much,  if  not  for  all,  that  is  evil  and 
wasteful  in  the  present  industrial  system. 

It  is  also  evident  that  anything  which  interferes 
with  the  natural  tendency  of  surplus  capital  and 
labor  to  use  first  the  vacant  land  nearest  centers  of 
population,  before  going  to  more  remote  and  less 
desirable  land,  is  an  obstacle  to  employment.  Why 
should  farmers,  for  instance,  be  forced  into  the  wild- 
erness, while  on  the  outskirts  of  thriving  cities  and 
towns  and  in  the  midst  of  well-settled  communities, 
there  is  an  abundance  of  unused  land — land  on  which 
the  same  amount  of  labor  would  produce  wealth  in 
far  greater  quantities? 

In  the  suburbs  of  every  city  is  to  be  found  a  zone 
of  almost  wholly  unused  lands,  with  a  few  buildings 
scattered  over  it.  It  includes  the  territory  between 
the  thickly  settled  portion  of  the  town  and  the  culti- 
vated fields  of  the  adjoining  country.  Its  area  is  in- 
variably many  times  greater  than  that  of  the  city 
proper.  As  the  city  grows,  this  zone  widens  and  en- 
croaches more  and  more  on  the  surrounding  lands  in 
cultivation.  The  price  at  which  land  is  held  within 
these  zones  prohibits  its  purchase  for  any  agricul- 
tural use,  and  besides,  the  sale  of  it  to  speculators 
and  investors,  in  small  and  isolated  tracts,  spoils  its 
use  for  such  purposes.  Nor  is  it  profitable  to  encum- 
ber these  lands  with  leases  which  would  protect  the 
improvements  of  the  tenant  farmer,  since  the  rent 
would  be  trifling  in  comparison  v/ith  the  value  of  the 
land.  Town  lots  can  generally  be  raised  upon  land 
of  this  character  more  profitably  than  vegetables. 


Obstacles  to  Employment  85 

Hence,  such  land  is  often  subdivided  into  lots  and 
blocks  a  generation  or  more  in  advance  of  any  eco- 
nomic necessity  for  it.  Not  one  acre  in  ten,  often 
not  one  in  twenty,  between  the  constantly  extending 
lines  by  which  these  zones  are  bounded,  is  used  for 
any  productive  purpose ;  yet  on  no  other  lands  in  the 
country  could  so  much  agricultural  wealth  be  pro- 
duced with  so  little  effort.  The  market  would  be  at 
the  farmer's  door,  and  the  fertilizing  wastes  of  the 
city  equally  convenient.  It  has  been  found  from 
actual  investigation  that  five  per  cent,  or  more  of 
the  working  men  of  any  city  in  the  United  States 
could  be  profitably  employed  in  the  cultivation  of 
these  unused  lands,  if  the  natural  availability  of  the 
lands  for  such  use  was  alone  to  be  considered. 

The  questions  suggested  in  this  connection  are 
these :  Why  should  the  cultivation  of  the  soil  in  the 
immediate  vicinity  of  the  thickly  settled  portion  of 
every  thriving  town  and  city  be  so  largely  aban- 
doned, ten  or  a  dozen,  or  perhaps  twenty-five  or  even 
fifty  years,  or  more,  in  advance  of  any  real  demand 
for  it  for  building  sites?  Why  should  not  the  culti- 
vation of  this,  the  most  valuable  of  all  lands  for 
agricultural  uses,  continue  until  the  very  time  v>^hen 
it  is  really  needed  and  actually  used  for  building  pur- 
poses? Why  must  energy  be  wasted  in  transporting 
small  fruits  and  vegetables  scores  and  hundreds  of 
miles  while  land  in  the  very  midst  of  consumers  lies 
unused  and  uncultivated?  And  this  suggests  other 
questions :  Why,  in  the  building  of  cities  and  towns, 
are  residences  on  the  outskirts  scattered  over  such 
wastes  of  unimproved  lots,  when  convenience  and 
economy,  health  and  happiness  would  be  better  sub- 
served by  a  compact  and  natural  order  of  settlement? 


86  The  Problem  of  the  Unemployed 

In  nine  cases  out  of  ten,  the  lot  most  desirable  and 
valuable  for  a  new  residence,  or  a  new  business  build- 
ing, is  the  first  unused  or  but  partially  used  one  to 
be  found,  counting  from  those  already  in  use.  Why 
should  effort  be  frittered  away  in  passing  by  such 
unused  lots  and  building  sidewalks,  roads  and  sewers 
to  those  more  remote  and  less  conveniently  situated? 
What  natural  and  economic  necessity  is  there  for 
such  waste  of  human  energy  ? 

It  is  not  necessary  for  all,  or  even  any,  of  the  un- 
employed themselves  to  turn  to  the  soil  in  order  to 
relieve  the  crowded  labor  markets  of  cities  and 
towns.  If  the  cultivation  of  land  now  vacant  were 
really  profitable — and  that  it  would  be  as  to  much 
of  it  near  the  centers  of  population,  but  for  the  enor- 
mous prices  demanded  for  access  to  it,  can  admit  of 
no  doubt — laborers  already  having  employment  in 
other  lines  of  business,  including  those  with  small 
means,  would  be  attracted  to  the  soil,  and  in  many 
instances  would  quickly  vacate  positions  in  cities  and 
towns,  to  the  benefit  of  the  unemployed  remaining 
there. 

The  willingness  of  people  in  every  trade  and  voca- 
tion in  life  to  go  to  unused  land,  and  live  upon  it  and 
cultivate  it  when  conditions  render  the  cultivation  of 
it  profitable,  is  shown,  to  some  extent  at  least,  in 
recent  years  by  the  tens  of  thousands  of  applications 
made  for  homesteads  when  reservations  in  the  In- 
dian Territory  were  opened  for  settlement.  The 
demand  for  these  unused  lands  under  laws  requiring 
use  and  occupancy  far  exceeded  the  supply.  While 
this  demand  was  doubtless  stimulated  by  the  hope 
of  deriving  profit  from  mere  increase  in  value  of 
land,  yet  the  settlement  of  the  country  would  have 


Obstacles  to  Employment  87 

been  little  less  rapid,  had  no  other  inducement  been 
held  out  to  landless  families  than  escape  from  the 
payment  of  land  rent  or  land  purchase  money. 

This,  then,  is  the  situation :  A  few  laborers  are 
always  out  of  work  and  ready  to  take  the  places  of 
those  who  have  work.  So  long  as  such  conditions 
prevail,  wages  can  never  rise  from  natural  causes, 
but  must  always  tend  to  fall.  The  proportion  of  the 
unemployed  to  the  employed  in  every  industry  is 
probably  about  the  same,  but  even  if  this  were  other- 
v/ise  it  would  be  immaterial  in  view  of  the  ease  with 
which  labor  in  any  other  industry  can  adapt  itself 
to  most  of  the  work  required  in  the  cultivation  of  the 
soil.  Many  of  the  unemployed  have  left  the  country, 
either  because  of  lack  of  employment,  or  on  account 
of  the  small  wages  paid  on  farms,  and  are  competing 
against  laborers  in  other  lines  of  employment  in 
cities  and  towns.  Some  of  these,  as  well  as  those  in 
other  lines,  would  gladly  turn  to  agriculture,  if  as- 
sured of  higher  wages  or  better  positions.  Suppose 
six  per  cent,  of  laborers  to  be  unemployed.  Now  if 
one-third  of  them,  or  but  two  per  cent,  of  all  labor- 
ers, went  to  work  as  farmers  on  unused  lands,  it  is 
evident  that  they  would  raise  food  to  exchange  for 
things  which  the  other  two-thirds,  at  present  unem- 
ployed, could  produce.  A  demand  being  thus  created 
for  the  product  of  the  latter,  their  employment  would 
also  follow,  and  thus  all  idle  men  willing  to  work 
could  get  work  without  depriving  of  work  any  of 
those  previously  employed. 

The  world  never  suffers  from  over-production,  but 
always  from  under-consumptlon.  Millions,  with  but 
a  single  suit  of  clothing  each,  would  gladly  buy  more 
garments  if  they  had  anything  to  give  in  exchange 


88  The  Problem  of  the  Unemployed 

for  them.  Mankind  would  consume  more  of  the 
comforts  and  luxuries  of  life,  if  with  unflagging  toil 
the  wherewithal  with  which  to  pay  for  them  could 
be  obtained.  The  idle  shoemaker  needs  clothing,  and 
the  idle  spinner  needs  shoes,  and  both  need  better 
houses,  and  the  idle  carpenter  needs  both  clothes  and 
shoes,  and  all  need  better  food  and  more  of  it.  The 
idle  laborer  who  might  be  employed  on  the  vacant 
land  so  near  cities  and  towns,  and  in  the  cultivation 
of  which  the  employing  capitalist  could  afford  to  pay 
good  wages,  but  for  the  enormous  investment  re- 
quired for  its  purchase,  also  needs  shoes,  clothing 
and  houses,  and  so  it  is  in  all  vocations  and  callings. 
If  the  idle  shoemaker  had  work,  he  could  buy  clothes ; 
if  the  idle  spinner  had  work,  he  could  buy  shoes ;  and 
if  the  idle  carpenter  had  work,  he  could  buy  shoes 
and  clothes ;  and  the  spinner  and  shoemaker  could 
both  live  in  better  houses  made  by  the  carpenter,  and 
all  could  eat  better  food  and  more  of  it,  produced  by 
the  laborer  working  upon  these  vacant  lands.  Hence, 
if  all  who  are  idle  could  be  thus  fully  employed,  this 
employment  would  not  lessen  the  demand  for  the 
labor  of  those  who  are  already  employed,  and  the 
manufacturer,  merchant  and  all  other  business  men 
engaged  in  legitimate  wealth-producing  enterprises 
would  participate  in  the  general  activity  and  pros-- 
perity  which  would  then  ensue.  Prosperous  times 
always  come  with  increase  in  the  demand  for  labor, 
and  this  demand  always  produces  higher  wages  for 
the  laborer. 

Nothing  is  more  fallacious  than  the  notion  that 
the  amcfunt  of  work  to  be  done  in  the  world  is  neces- 
sarily a  fixed  quantity,  and  that  the  employment  of 
one  man  robs  another  man  somewhere  of  his  job. 


Obstacles  to  Employment  89 

Unless  the  laborer  is  employed,  he  can  consume  but 
little  wealth,  for  he  has  little  or  nothing  to  give  in  ex- 
change for  it.  If  he  has  work,  he  and  the  capitalist 
and  the  land  owner,  and  sometimes  others,  among 
whom  the  product  of  his  labor  is  divided,  consum^e 
as  much  wealth  produced  by  others  as  he  produces 
himself.  This  is  so  because  the  wealth  which  he  pro- 
duces is  exchanged  for  that  produced  by  others,  and 
the  demand  for  labor  resulting  from  this  consump- 
tion of  the  product  of  other  laborers  exactly  equals 
the  supply  of  labor  which  his  own  employment  af- 
fords. 

The  problem  of  the  unemployed  would  seem  to  be 
solved,  therefore,  if  only  a  small  additional  percent- 
age of  the  entire  laboring  population  could  get  work 
upon  a  very  small  percentage  indeed  of  the  unused 
land.  Such  lands,  suitable  for  most  profitable  agri- 
cultural work,  are  to  be  found  in  quantities  sufficient 
for  this  purpose,  in  large  part  at  least,  in  and  near 
the  very  suburbs  of  cities  and  towns,  to  say  nothing 
of  unused  or  but  partially  used  farming  lands  in 
every  farming  community.  When  times  are  dull  and 
the  labor  market  is  glutted,  the  small  capitalist  and 
the  laborer  must  often  look  with  longing  eyes  to  the 
nearby  unused  or  but  partially  used  lands.  What  is 
it  which  prevents  employment  upon  these  lands? 

It  is  obvious  that  there  is  some  obstacle,  artificial 
or  otherwise,  which  always  prevents  the  full  employ- 
ment of  labor.  It  is  also  evident,  as  has  been  shown, 
that  this  obstacle  is  not  labor-saving  machinery,  or 
increase  of  population,  or  any  real  scarcity  of  land ; 
it  is  also  evident  that  the  removal  of  the  obstacle, 
whatever  it  may  be,  Vv'ould  give  increased  opportuni- 
ties for  employment,  from  which  would  follow  an 


90  The  Problem  of  the  Unemployed 

increased  demand  for  labor  with  increased  wages 
for  the  laborer  and  increased  prosperity  in  every 
wealth-producing  enterprise. 

But  it  is  sometimes  seriously  urged  that  the  so- 
called  high  wages  insisted  on  by  laborers  in  this  coun- 
try is  an  obstacle  to  employment,  and  that  if  wages 
were  lower  the  demand  for  labor  would  be  greater. 
This  simply  means  that  if  our  v/orkers  would  submit 
to  the  standard  of  living  prevailing  among  the  work- 
ers of  the  old  world,  and  thus  accept  a  smaller  share 
of  the  wealth  produced  by  the  partnership  of  land, 
capital  and  labor,  more  of  them  would  find  employ- 
ment. But  why,  in  the  nature  of  things,  should  giving 
the  land  owner  or  the  capitalist  more  of  the  product 
increase  the  demand  for  the  product  itself?  Without 
an  increased  demand  for  what  labor  produces  there 
can  be  no  increased  demand  for  laborers.  If  the 
scale  of  wages  were  reduced  the  ability  of  laborers 
to  consume  would  also  be  reduced,  and  this  surely 
would  not  tend  to  increase  the  demand  for  things 
produced  by  laborers. 

The  notion  that  if  wages  were  lower  new  enter- 
prises would  be  started,  which  are  now  impossible  on 
account  of  the  prevailing  rate  of  wages,  originates 
from  conditions  of  which  the  following  is  an  illustra- 
tion :  A  man  is  thinking  of  going  into  the  sawmill - 
business  in  a  certain  locality.  He  has  no  timber 
lands  of  his  own.  He  finds  that  stumpage  will  cost 
him  three  dollars  per  thousand  and  common  labor 
a  dollar  and  seventy-five  cents  per  day.  On  this 
basis  he  is  unable  to  figure  out  satisfactory  wages 
for  himself  after  allowing  interest  on  his  capital,  so 
he  drops  the  matter.  He  tells  some  newspaper  man 
that  if  he  could  have  employed  common  labor  at  the 


Obstacles  to  Employment  91 

rate  of,  say,  a  dollar  a  day,  he  would  have  gone  ahead 
with  the  business.  The  newspaper  man  at  once 
jumps  to  the  conclusion  that  the  alleged  high  price 
of  labor  has  blocked  this  enterprise,  and  he  accord- 
ingly writes  about  the  scarcity  of  labor,  and  advo- 
cates the  repeal  of  the  Chinese  exclusion  act.  Had 
he  inquired  into  the  matter  a  little  further,  he  would 
have  learned  that  the  mill  man  would  gladly  have 
paid  a  dollar  and  seventy-five  cents  a  day  for  labor, 
provided  the  land  owner  had  priced  the  stumpage 
at,  say,  $1.50  instead  of  $3.00  per  thousand.  The 
land  owner  held  out  for  $3.00  per  thousand,  however, 
as  land  owners  do  everywhere,  because  he  believed 
that,  in  a  few  years  any  way,  he  could  get  that  for 
the  land  and  perhaps  more.  He  knew  the  land  would 
increase  in  value,  with  increase  of  population. 

Again,  we  read  occasionally  of  some  mine  oper- 
ator, perhaps,  who  would  open  up  this  or  that  coal 
bed  or  mineral  deposit,  if  he  could  get  cheaper  labor. 
In  the  first  place,  there  is  no  economic  necessity  for 
using  such  coal  beds  or  mineral  deposits,  there  being 
plenty  of  better  quality  or  nearer  at  hand  which  are 
unused,  and  from  which  more  wealth  could  be  ob- 
tained with  less  expenditure  of  labor.  And  so  it 
will  be  found  in  every  case  where  the  high  price 
of  labor  is  mentioned  as  an  obstacle  to  the  develop- 
ment of  the  country,  that  it  is  the  high  price  of  land 
which  either  directly  or  indirectly  blocks  the  enter- 
prise, and  not  the  price  of  labor.  In  other  words,  the 
real  obstacle  is  the  excessive  amount  of  tribute 
money  demanded  for  the  mere  privilege  of  employ- 
ment. 

The  fact  is,  the  less  the  employee  gets,  the  more 
the  land  owner,  and  not  the  employer  as  such,  will 


92  The  Problem  of  the  Unemployed 

get  in  the  long  run.  If  employees  consented  to  live 
on  starvation  wages,  in  the  hope  of  always  being 
able  to  find  employment  at  some  wage,  they  would  be 
bitterly  disappointed.  A  general  reduction  in  wages 
could  not  result  in  any  general  increase  in  the 
demand  for  labor.  If  it  had  the  effect,  in  the  first 
instance,  of  making  it  profitable  to  work  certain 
coal  beds  and  mineral  deposits  and  lands,  which 
would  otherwise  remain  unused,  there  would  follow 
an  increased  demand  for  such  lands.  This  would 
increase  the  price  to  be  paid  for  access  to  them,  and 
the  demand  for  labor  would  be  the  same  as  before, 
no  matter  how  low  wages  might  fall.  The  owners 
of  valuable  lands  would  alone,  ultimately,  be  bene- 
fited by  a  reduction  in  the  scale  of  wages.  This  bene- 
fit would  come  to  them  in  the  form  of  increased 
rents,  or  in  the  form  of  increase  in  the  value  of 
lands.  Nor  would  more  than  a  few,  comparatively, 
of  those  who  own  land  be  thus  benefited,  since  the 
overv/helming  majority  of  land  owners  in  this  coun- 
try have  greater  interests  as  capitalists  and  laborers 
than  as  land  owners. 

The  conclusion  that  lowering  wages  would  neither 
increase  the  wealth  of  the  country  at  large  nor  the 
demand  for  labor,  is  supported  by  fact  as  well  as  by 
theory.  Thus,  in  the  United  States,  the  per  capita 
of  wealth  of  the  nation  is  increasing  faster  than  in 
any  other  of  the  great  nations  of  the  world.  Times 
are  usually  better  and  the  demand  for  labor  is 
greater  here  than  elsewhere,  yet  wages  are  higher, 
and  there  are  fewer  unemployed  in  proportion  to 
population,  than  in  Europe.  Since  low  wages  in 
Europe  do  not  increase  the  dem.and  for  labor,  why 
should  it  be  supposed  that  lowering  the  scale  of 


Obstacles  to  Employment  93 

wages  here  would  have  that  effect?  The  rise  of  the 
mercury  in  the  thermometer  does  not  produce  hot 
weather,  neither  does  the  fall  of  it  produce  cold 
weather;  it  simply  indicates  the  condition  of  the 
weather.  In  the  same  way,  high  wages  do  not  pro- 
duce dull  times,  nor  do  low  wages  produce  good 
times,  but  when  times  are  good,  wages  rise,  and 
when  times  are  bad,  wages  fall.  The  scale  of  wages, 
as  it  rises  and  falls,  simply  indicates  whether  times 
are  comparatively  prosperous  or  otherwise. 

A  number  of  apparently  different  obstacles  to  the 
employment  of  capital  and  labor  can  be  easily 
pointed  out,  all  of  which,  however,  are  fundamentally 
the  same. 

It  is  apparent  that  until  the  factor  of  rent  ap- 
peared in  the  primitive  community  referred  to, 
wages  would  increase  with  every  invention  which 
increased  the  laborer's  power  to  produce  wealth.  For 
illustration,  let  it  be  assumed  that  considerable  prog- 
ress was  made  in  the  arts  and  sciences  before  land 
acquired  any  value.  With  no  opportunity  to  derive 
an  income  from  land,  or  to  obtain  gain  by  buying 
and  selling  it,  which  gain  is  the  same  as  rent,  the 
owner  of  wealth,  in  order  to  obtain  any  increase 
from  it  at  all,  would  have  been  compelled  to  use  it 
as  capital,  or  loan  it  to  one  who  would  use  it  as  such 
in  the  form  of  labor-saving  appliances.  In  the  con- 
struction and  operation  of  such  appliances  labor 
would  be  employed.  There  would  be  little  or  no 
opportunity  for  the  profitable  investment  of  wealth 
except  in  some  enterprise  giving  employment  to 
labor,  because  wealth  could  not  be  invested  in  the 
purchase  of  land.  The  illimitable  resources  of  the 
earth  being  absolutely  free  to  all,  it  is  obvious  that 


94  The  Problem  of  the  Unemployed 

competition  among  capitalists  for  laborers  would 
enable  labor  to  command  and  receive  in  increased 
wages  a  far  greater  portion  of  the  additional  wealth 
produced  by  improved  appliances,  to  say  the  least  of 
it,  than  if  wealth  could  be  profitably  invested  with- 
out employing  labor.  Applying  the  line  of  thought 
thus  suggested  to  conditions  as  they  really  exist,  it 
will  be  seen  that  in  any  event  one  of  the  reasons 
why  wages  do  not  increase  with  increased  produc- 
tion is  because  wealth  can  be  profitably  invested  in 
land — because  it  can  be  invested  otherwise  than  in 
the  employment  of  labor. 

In  any  prosperous  country,  a  certain  amount  of 
wealth  is  annually  accumulated  and  saved,  which 
must  seek  investment  in  some  form.  Generally 
speaking,  there  are  but  two  ways  in  the  main  by 
which  the  owner  of  such  surplus  wealth  can  invest 
it  so  as  to  derive  a  permanent  income  from  it.  One 
way  is  to  invest  it  directly  or  indirectly  as  capital  in 
a  wealth-producing  enterprise  which  requires  the 
employment  of  labor  and  increases  the  demand  for 
labor.  This  is  done  where  the  owner  of  wealth  or 
the  bank  which  has  it  on  deposit  uses  it  or  loans  it 
to  one  who  uses  it  in  farming,  merchandising,  min- 
ing, or  manufacturing.  The  other  way  is  to  invest 
it  in  land.  The  investment  in  land  does  not  need  the. 
assistance  of  labor  or  require  the  payment  of  wages, 
nor  does  it  compel  owners  of  wealth  to  bid  against 
each  other  for  labor.  Wealth  may  be  thus  invested 
and  large  gains  realized  from  it  without  its  owners 
paying  out  one  dollar  in  wages  or  contributing  in 
the  slightest  degree  to  the  success  of  any  wealth-pro- 
ducing enterprise.  It  is  also  a  safe  form  of  invest- 
ment, and  one  attended  with  little  hazard  and  no 


Obstacles  to  Employment  95 

annoyance  from  walking  delegates  and  strikers, 
while  every  improvement  in  the  arts  and  sciences 
and  in  social  relations,  as  well  as  increase  of  popula- 
tion, adds  to  its  value.  And  so,  as  this  surplus 
wealth  accumulates  and  is  saved  for  permanent  in- 
vestment purposes,  instead  of  all  of  it  being  used  in 
the  employment  of  the  additional  number  of  laborers 
annually  needing  employment  with  increase  of  pop- 
ulation, only  a  portion  of  it  is  used  for  this  purpose. 
With  the  remainder,  land  is  purchased  for  invest- 
ment and  speculative  purposes  only,  and  not  for 
the  employment  of  labor.  In  fact,  land  is  often 
purchased  for  the  avowed  purpose  of  preventing 
capital  and  labor  from  being  employed  upon  it  until 
enormous  sums  can  be  exacted  for  this  privilege. 

The  fact  that  wealth  can  be  used  in  the  purchase 
of  land  not  only  affords  an  opportunity  for  its  in- 
vestment without  giving  employment  to  labor,  but 
it  often  gives  land  an  unreal  and  fictitious  value. 
This,  also,  constitutes  an  obstacle  to  the  employment 
of  labor.  The  unused  natural  opportunity,  be  it  a 
vacant  building  or  manufacturing  site,  or  vacant 
land  suitable  for  a  farm,  or  an  unused  coal  bed  or 
mineral  deposit,  is  usually  held  at  a  price  in  excess  of 
its  present  value  for  any  productive  purpose.  It  is 
so  held  in  anticipation  of  an  increase  in  value  from 
increase  of  population  and  general  social  improve- 
ment. The  owner  of  the  land  and  the  employing 
capitalist  who  wants  it  for  some  useful  enterprise, 
may  not  agree  with  each  other  upon  this  uncertain 
and  speculative  value.  The  land  may  or  may  not 
increase  in  value  as  rapidly  as  the  owners  believe 
it  will.  Capital,  under  such  circumstances,  doubts 
and  halts,  and  the  land  often  continues  to  lie  idle 


96  The  Problem  of  the  Unemployed 

and  unused  on  this  account.  It  may  be  so  situated 
in  itself,  without  reference  to  its  price,  as  to  insure 
far  greater  returns  to  capital  and  labor  than  could 
be  obtained  from  other  lands  perhaps  equally  as 
suitable  for  the  purpose  intended,  but  which  are 
more  remote  from  markets  and  centers  of  popula- 
tion. The  fact  that  one  hundred  dollars  per  acre, 
for  instance,  is  sometimes  asked  for  unused  land,  the 
economic  value  of  which  does  not  exceed  fifty  dollars, 
because  the  sanguine  owner  thinks  it  will  be  worth 
one  hundred  and  fifty  dollars  within  ten  years,  dis- 
courages the  investment  of  capital  and  the  employ- 
ment of  labor  in  its  cultivation.  It  has  this  effect, 
not  only  because  it  requires  so  much  more  wealth  to 
get  hold  of  the  land,  but  because  there  is  always 
more  or  less  doubt  whether  it  will  actually  increase 
in  value  fast  enough  to  make  the  entire  investment 
a  paying  one. 

Again,  wealth  in  immense  quantities  is  invested  in 
land,  and  especially  in  unused  land,  for  speculative 
purposes  only.  This  is  also  one  of  the  greatest  ob- 
stacles to  the  employment  of  labor.  A  man  v/ith 
money  to  invest  goes  into  a  new  country,  or  to  the 
suburbs  of  cities  and  towns,  and  buys  vacant  land  in 
advance  of  the  homeseeker,  not  to  produce  wealth  on 
it  himself,  but  in  reality  to  prevent  others  from  doing 
so.  The  land  is  thus  held  in  idleness  until  the  neces- 
sities of  capitalists  and  laborers  compel  the  payment 
to  the  speculator  of  a  profit  as  a  reward  for  the  lat- 
ter's  forethought  in  first  seizing  the  opportunity  for 
employment  which  the  land  affords.  The  speculator 
must  usually  be  paid  a  sum  not  only  equal  to  the 
economic  value  of  the  land,  regardless  of  what  it  may 
have  cost  him,  but  also  all  in  addition  which  anyone, 


Obstacles  to  Employment  97 

who  is  willing  to  gamble  in  the  bounties  of  nature, 
may  believe  it  to  be  worth  from  a  speculative  point 
of  view. 

The  disposition,  so  widely  prevalent  among  all 
classes,  to  gamble  in  land  gives  it  an  abnormal  ficti- 
tious value.  The  price  of  unused  land  is  often  so 
high  as  absolutely  to  prohibit  its  purchase  for  use 
in  any  wealth-producing  enterprise.  This  is  the  most 
important  if  not  the  sole  cause  of  the  phenomenon 
known  as  a  financial  panic. 

A  financial  panic  occurs,  as  follows :  When,  after 
a  period  of  dull  times,  one  of  comparative  prosperity 
arises,  and  many  people  begin  to  "save  money," 
much  of  the  wealth  which  thus  accumulates  is  natur- 
ally invested  in  land.  It  goes  into  city  and  town  lots, 
and  farming  la-nds,  and  into  stocks  and  securities 
based  in  large  part  on  the  ownership  of  land,  includ- 
ing the  ownership  of  mineral  deposits,  and  the  right- 
of-ways  and  immensely  valuable  terminals  of  rail- 
roads, and  privileges  enjoyed  by  public  utility  com- 
panies. Stocks  based  on  land  begin  once  more  to 
slowly  increase  in  price,  as  more  and  more  wealth 
accumulates  to  be  invested  in  something  from  which 
ultimate  gain  or  a  permanent  revenue  can  be  derived. 
Soon  prices  begin  to  advance  more  rapidly.  This 
renders  such  investments  attractive  from  a  specu- 
lative and  gambling  point  of  view,  and  prices 
advance  with  greater  and  greater  rapidity.  This 
stimulates  further  investment,  and  prices  advance 
still  more  rapidly,  and  go  still  higher  and  higher. 
After  awhile  a  speculative  craze  takes  hold  of  many 
people,  and  the  prices  often  reach  the  point  at  which 
it  is  impossible  for  employers  to  reap  any  reward 
in   connection   with   new   enterprises   upon   vacant 


98  The  Problem  of  the  Unemployed 

lands,  after  payment  of  prevailing-  rates  of  interest 
on  the  amount  required  in  purchasing  them.  It  is 
invariably  the  case,  just  before  the  "boom"  bursts 
and  the  panic  begins,  that  the  natural  opportunities 
for  employment,  such  as  the  vacant  farming  lands 
referred  to  as  held  at  one  hundred  and  fifty  dollars 
per  acre,  the  unused  factory  sites,  mineral  deposits 
and  water  fronts,  the  idle  business  and  residence 
lots,  all  become  so  dear,  and  so  much  wealth  is 
demanded  for  the  mere  privilege  of  using  them,  that 
capital  sees  no  profit  in  giving  employment  to  labor 
in  connection  with  them.  Meantime  the  laboring  pop- 
ulation is  naturally  increasing.  Surplus  labor  result- 
ing from  such  increase  can  only  obtain  work  in  con- 
nection with  these  unused  lands,  which  are  held  at 
prohibitive  prices.  And  rents  also  advance  in  sym- 
pathy with  the  increase  in  land  values.  The  house- 
holder and  business  man  are  required  to  pay  more 
and  more  to  the  landlord,  and  the  longer  the  "boom" 
lasts,  the  higher  and  higher  is  the  amount  of  tribute 
which  the  land  owner  demands.  Finally  when  the 
burden  upon  wealth-producing  enterprises  can  be 
borne  no  longer,  when  prices  charged  for  wealth- 
producing  opportunities  have  been  so  inflated  that 
future  valuations  can  be  no  longer  discounted  even 
in  the  mind  of  the  most  credulous  and  optimistic  of 
speculators,  the  crash  comes.  It  usually  comes  sud- 
denly, but  it  may  come  gradually.  Its  coming  under 
existing  conditions  is  as  inevitable  after  a  period  of 
prosperity  as  the  coming  of  winter  after  summer. 

Prosperity  means  the  accumulation  of  surplus 
wealth,  and  as  such  wealth  accumulates  much  of  it 
is  invested  in  land.  This  stimulates  the  demand  for 
land  and  brings  about  an  advancing  real  estate  mar- 


Obstacles  to  Employment  99 

ket,  and  this  causes  a  greater  eagerness  to  own  land 
and  reap  the  benefit  of  advancing  prices.  This  of 
itself  produces  higher  prices  for  lands  and  stocks 
and  bonds  based  on  land  values,  and  this  is  followed 
by  even  greater  anxiety  to  buy.  And  so,  after  every 
period  of  depression,  the  boom  gradually  begins  over 
again,  and  rises  and  continues  to  rise  higher  and 
higher  until  the  inevitable  collapse  is  followed  by 
dull  times  and  a  decline  in  prices,  to  be  followed  after 
awhile  again  by  prosperous  times,  from  ivhich  pros- 
peHty  itself  is  developed  the  force  which  chokes  it. 
The  panics  of  1837,  1857,  1873,  1893  and  1907  were 
all  preceded  by  great  real  estate  booms,  and  followed 
by  a  marked  decline  in  land  values.  Nor  can  any 
period  of  prosperity  be  continuous  so  long  as  condi- 
tions exist  which  often  make  it  more  profitable  to  in- 
vest wealth  in  the  mere  purchase  of  the  opportuni- 
ties for  the  employment  of  labor  which  land  affords 
than  to  invest  it  in  the  employment  of  labor  itself. 

The  same  obstacles  to  employment  which  tend  to 
lessen  the  demand  for  labor,  also,  in  numerous  ways, 
compel  capital  and  labor  to  work  to  a  disadvantage, 
and  consequently  less  wealth  is  produced  from  the 
amount  of  labor  expended  than  would  otherwise  be 
the  case.  For  instance,  a  tenant  farmer  of  Illinois, 
after  years  of  economy,  becomes  a  capitalist  as  well 
as  a  laborer.  Being  thus  the  owner  of  a  small  sum 
of  money,  a  team  and  a  few  agricultural  implements, 
he  puts  his  wife  and  children  and  the  remnant  of  his 
scanty  furniture  into  his  wagon  and  starts  out  to 
find  unused  land  on  which  his  capital  and  labor  can 
be  profitably  employed.  There  is  plenty  of  unused 
or  but  partially  used  land  in  the  very  neighborhood 
which  he  is  about  to  leave.    On  this  land,  owing  to 


100  The  Problem  of  the  Unemployed 

its  proximity  to  good  markets,  as  well  as  the  fertility 
of  the  soil,  he  could  produce  far  more  wealth  with 
the  same  amount  of  labor  than  on  any  of  the  land 
which  he  is  seeking,  but  the  price  of  it  as  to  him  is 
prohibitive.  After  a  weary  journey  of  many  weeks, 
during  which  he  passes  millions  of  unused  acres,  he 
reaches  a  thriving  town  on  a  railroad  in  Texas.  It 
has  schools  and  churches  and  in  its  neighborhood  are 
fairly  good  highways.  It  is  the  market  place  for 
the  surrounding  territory.  On  the  very  skirts  of  this 
town  lie  plenty  of  unused  and  fertile  lands.  Why 
does  he  not  settle  on  some  of  this  land,  close  to  town, 
where  his  family  can  have  the  benefit  of  schools  and 
social  advantages,  and  where  his  crops,  when  raised, 
will  be  near  a  railroad  shipping  point?  Simply 
because  the  price  charged  for  it  is  also  prohibitive, 
so  far  as  he  is  concerned.  So  he  drives  on  twenty 
miles  further  and  settles  in  a  wilderness,  remote 
from  neighbors  and  schools  and  churches,  where  the 
highways  are  little  more  than  trails  through  the 
woods  and  over  the  prairies.  He  contracts  for  a 
hundred  acres  of  land,  at  ten  dollars  per  acre.  He 
needs  the  use  of  every  dollar  of  his  little  hoard  as 
capital  with  which  to  provide  a  rude  shelter  and 
food  for  the  first  year,  and  so  he  goes  in  debt  as 
deeply  as  possible  for  his  land.  This  compels  him 
to  apply  the  money  which  he  saves  to  the  purchase 
price  of  land,  rather  than  to  the  purchase  of  live 
stock  and  agricultural  machinery  which  would 
enable  him  to  produce  wealth  with  greater  ease  and 
in  greater  quantities.  He  and  his  family  begin  sin- 
gle-handed what  is  always  a  lonesome  and  sometimes 
a  terrific  struggle  with  unsubdued  nature.  A  trip 
to  market  with  sl  few  eggs  or  a  little  butter,  or  a  few 


Obstacles  to  Employment  101 

dollars  worth  of  vegetables,  means  the  loss  of  two 
days  for  himself  and  team,  no  matter  how  little 
there  may  be  to  be  carried  either  way.  And  so 
almost  as  much  energy  is  wasted  in  getting  his  crops 
to  market  as  is  spent  in  raising  them.  As  he  hauls 
them  over  the  poor  roads,  he  passes  thousands  of 
unused  acres  nearer  the  market,  and  perhaps  of 
greater  fertility,  on  which  his  labor  would  be  pro- 
ductive of  far  more  wealth,  not  alone  to  his  advan- 
tage, but  to  the  advantage  of  the  entire  business 
world.  And  so  this  farmer  may  work  all  his  life 
to  an  unnecessary  disadvantage,  as  millions  of  other 
farmers  in  greater  or  less  degree  are  doing  in  this 
country  at  the  present  time.  And  this  must  always 
be  so  while  unused  land  can  be  found  on  which  an 
equal  expenditure  of  capital  and  labor  will  produce 
more  wealth  than  on  land  in  use. 

The  enormous  waste  of  labor  and  energy  seen  in 
the  case  of  some  farmers  being  driven  into  the  wil- 
derness, in  nearly  all  farmers  being  deprived  in  great 
degree  of  the  benefits  of  social  life,  and  compelled  to 
contend  with  poor  highways  in  hauling  crops  over 
unnecessary  distances,  amounting  as  it  does,  in  this 
country,  to  hundreds  of  millions  of  dollars  annually, 
would  be  saved  if  all  the  unused  land  nearest  centers 
of  population  were  first  put  into  cultivation.  Yet 
this  is  but  part  of  the  story.  The  economic  loss  re- 
sulting from  the  same  cause  is  equally  great  if  not 
greater  in  other  lines  of  industry,  and  especially 
with  the  housing  of  workers  of  all  classes  in  cities 
and  towns. 

We  eagerly  seize  upon  every  mechanical  device  for 
saving  labor.  Trusts  and  immense  aggregations  of 
capital    are    organized    largely    for    this    purpose. 


102  The  Problem  of  the  Unemployed 

Human  ingenuity  is  taxed  to  the  utmost  to  invent 
processes  by  which  the  greatest  amount  of  wealth 
can  be  produced  with  the  least  expenditure  of  labor. 
But  while  on  every  hand  the  waste  resulting  from 
the  misuse  of  land,  and  the  poverty,  discomfort  and 
misery  which  this  occasions  is  so  obvious,  we  pass 
the  subject  by  without  thought  or  comment,  as 
though  such  things  were  in  harmony  with  the 
natural  law  and  required  no  explanation. 

We  laugh  at  the  stupidity  of  the  ant,  which,  on 
finding  a  post  standing  in  its  path,  carries  its  burden 
up  one  side  of  it  and  down  the  other,  instead  of  easily 
going  around  it;  yet  man's  way  of  using  the  earth 
in  many  instances  would  not  appear  less  absurd 
to  a  visitor  from  a  world  in  which  obedience  to  the 
natural  law  prevailed.  Suppose  such  a  being  to  drop 
suddenly  into  the  tenement  district  on  the  East  Side, 
in  New  York  City.  He  would  find  people  huddled 
together  like  beasts  in  a  stock  yard;  families  with 
children,  of  all  ages  and  sexes,  sometimes  occupying 
a  single  room.  And  thus,  without  privacy,  comfort 
or  decency,  babes  are  born  and  human  beings  sicken 
and  die.  In  some  instances  he  would  find  a  thousand 
men,  women  and  children  living,  or  trying  to  live, 
in  six  and  seven  story  houses,  covering  scarcely  an 
acre  of  ground.  After  he  had  experienced  the  noise 
and  confusion,  and  stench  and  dirt,  and  the  intoler- 
able discomfort  of  it,  for  a  day  and  a  night,  he  would 
certainly  come  to  the  conclusion  that  this  was  a 
much  crowded  world,  and  that  land  was  very  scarce. 
Imagine,  then,  his  astonishment  on  ascertaining  that 
there  were  thousands  of  acres  of  unused  land,  and 
nearly  two  hundred  thousand  unused  building  lots, 
within  the  limits  of  Greater  New  York ;  that  the  pop- 


Obstacles  to  Employment  103 

Illation  of  the  city  averaged  but  twenty-seven  to  the 
acre ;  that  much  of  this  unused  land,  owing  to  mod- 
ern transportation  facilities,  was  already  in  effect 
but  a  few  minutes  walk  from  the  shops  and  factories 
in  which  the  bread-winners  of  the  city  were 
employed,  and  that  it  was  easily  within  the  power 
of  man  to  bring  it  all  within  the  same  distance. 

Imagine  his  surprise,  again,  on  visiting  a  suburb 
of  the  city,  to  see  the  exact  reverse  of  what  amazed 
him  so  in  the  tenement  district,  for  here  he  would 
find  people  living  too  far  apart,  instead  of  too  near 
together.  Instead  of  the  lawns  and  gardens,  which 
surrounded  many  of  the  houses,  adjoining  each  other, 
and  instead  of  all  the  improved  places  being  within 
as  convenient  distances  as  possible  from  the  near-by 
railroad  station,  there  would  be  wide  and  ugly  gaps 
of  unimproved  lands  intervening  everywhere,  with 
signs  of  "For  Sale."  For  every  lot  improved  within 
the  square  mile  or  so  tributary  to  a  railway  station, 
he  would  find  perhaps  ten  or  twenty  unimproved. 
He  would  find  the  houses  and  homes  so  scattered 
over  wide  areas  that  paved  streets  and  sidewalks, 
and  sewerage  and  water,  and  electric  service  for  all 
of  them,  would  require  the  expenditure  of  ten  times 
as  much  labor  as  would  be  necessary  but  for  the 
intervening  spaces  of  unused  lots,  so  often  adorned 
with  dead  cats  and  tin  cans. 

And  not  only  in  this  suburb  of  New  York,  but  in 
the  vicinity  of  every  city,  town  and  village,  he  would 
find  the  same  condition.  In  the  aggregate,  there  are 
tens  of  millions  of  people  in  this  country  thus  need- 
lessly living  on  muddy  streets,  with  poor  sidewalks, 
or  no  sidewalks  at  all.  They  are  compelled  to  fill  out 
daily  labors  v/ith  unnecessarily  long  journeys  to  and 


104  The  Problem  of  the  Unemjjloyed 

from  homes  and  places  of  business,  passing  on  the 
way  dreary  wastes  of  unused  lots.  Millions  are  thus 
deprived  of  numberless  social  advantages  which  add 
immensely  to  the  comfort  and  happiness  of  life  and 
to  the  efficiency  of  wealth  producers,  although  there 
is  no  real  economic  necessity  for  it. 

Again,  this  celestial  visitor  would  often  find  land 
in  which  a  coal  bed  or  mineral  deposit,  for  instance, 
was  so  near  the  surface,  or  so  near  tide  water,  or  of 
so  rich  a  quality,  that  a  minimum  of  labor  would 
produce  a  maximum  of  wealth,  unused  and  just  as 
the  savages  left  it;  while  in  the  same  vicinity  men 
would  pass  it  by  and  apply  effort  to  the  production 
of  coal  and  ore  from  lands  requiring  twice  as  much 
labor  to  produce  the  same  results.  And  so,  on  every 
side,  he  would  see  men  unnecessarily  increasing 
their  burdens  and  displaying  as  little  intelligence, 
apparently,  in  the  use  of  the  land,  as  the  ant  exer- 
cised in  climbing  over  the  obstacle  instead  of  going 
around  it.* 

*A  lot  of  hogs  breaking  into  a  field  of  corn  will  quarrel  over 
it,  scacter  the  corn  about,  trample  it  into  the  mud,  and  for 
every  bushel  eaten  vi^ill  destroy  ten.  Put  before  them  in  this 
manner  food  enough  for  a  year,  and  it  will  not  last  a  month. 
In  the  same  way,  under  existing  conditions,  when  men  discov- 
er an  extraordinarily  rich  deposit  of  some  bounty  of  nature, 
they  will  often  act  like  hogs,  and  waste  and  destroy  it  as  fool- 
ishly and  as  recklessly.  Thus,  in  1901,  the  first  paying  oil 
well  in  Southern  Texas  was  brought  in  on  Spindle  Top,  near 
Beaumont.  The  oil  and  gas  spouted  far  above  the  top  of  the 
derrick,  and  the  well  flowed  pure  oil  at  the  rate  of  a  hundred 
thousand  barrels  a  day.  There  was  no  immediate  market  for 
this  immense  production,  and  no  facilities  were  ready  for  stor- 
ing and  transporting  it.  Nevertheless,  another  well  was  at 
once  started  near  by,  and  it  proved  to  be  as  productive  as  the 
first  one.  Human  beings  then,  manifesting  the  disposition  of 
hogs,  and  displaying  as  little  intelligence  in  conserving  and 
making  this  oil  and  the  gas  found  with  it  useful  to  mankind, 
proceeded  to  waste  and  destroy  it  as  hogs  would  waste  and 
destroy  a  field  of  corn. 


Obstacles  to  Employment  105 

The  land  was  divided  into  small  tracts,  and  subdivided 
again  and  again  into  still  smaller  ones,  the  subdivisions,  in 
many  instances,  not  exceeding  a  thirty-second  part  of  an  acre; 
it  was  sold  and  resold,  some  of  it  being  finally  sold  at  the 
rate  of  a  hundred  thousand  dollars  per  acre.  In  less  than  tv/o 
years  six  hundred  and  fifty  oil  wells  were  put  down  within  an 
area  of  about  eighty  acres,  each  well  with  its  equipments 
costing  from  four  to  ten  thousand  dollars,  and  many  of  them 
were  less  than  thirty  feet  from  other  wells.  The  waste  oil 
was  drained  away  in  ditches  and  burned  on  the  open  prairie 
at  the  rate  of  10,000  barrels  a  day.  It  was  not  worth  pumping 
into  the  storage  tanks,  all  of  which  being  connecte-l  directly 
with  the  gushers  were  filled  to  overflowing.  Millions  of  bar- 
rels of  oil  were  sold  for  five  cents  a  barrel  and  less.  The  oil 
field  in  the  distance  resembled  a  closely  wooded  forest,  so 
thick  were  the  derricks,  and  when  one  derrick  caught  fire  and 
burned  hundreds  of  others  burned  also.  The  field  was  time 
and  time  again  devastated  by  fires  which  swept  away  hundreds 
of  thousands  of  dollars  worth  of  property.  One  or  two  v/ells 
to  the  acre  would  have  been  amply  sufficient  to  have  obtained 
all  the  oil  in  the  grounds  covered  by  the  eighty  acres;  hence 
the  reservoir  below  holding  the  gas  which  forced  the  oil  up 
Avas  needlessly  pierced  in  more  than  six  hundred  places  by 
more  than  six  hundred  needless  wells.  This  caused  the  dissi- 
pation and  loss  of  an  immense  store  of  gas.  Had  this  gas 
been  properly  cared  for  and  left  in  the  ground  until  needed, 
it  not  only  would  have  brought  the  oil  to  the  surface  for  many 
years  as  fast  as  it  could  have  been  profitably  consumed,  but 
the  gas  would  have  afforded  fuel  and  light  of  the  value  of 
perhaps  millions  of  dollars  to  the  neighboring  city  of  Beau- 
mont. The  wells  soon  ceased  to  flow,  and  expensive  pumping 
plants  had  to  be  installed.  Then  salt  water  appeared  in  the 
place  of  oil,  and  the  production  of  the  original  field  fell,  within 
four  years,  to  less  than  5,000  barrels  a  day. 

Over  ten  millions  of  dollars  were  wasted  in  extracting  less 
than  fifty  million  barrels  of  oil  from  Spindle  Top. 


CHAPTER  VIII. 

EFFECT  OF  A  REAL  SCARCITY  OF  LAND  ON  RENT, 
INTEREST   AND   WAGES. 

T  being  evident,  as  shown  in  the  preceding  chap- 
ters, that  low  wages  and  lack  of  employment  can 
not  be  attributed  to  labor-saving  machinery,  nor  to 
mere  increase  of  population,  nor  to  any  real  scarcity 
of  land,  it  will  be  both  interesting  and  profitable  to 
consider  what  effect  a  scarcity  of  land,  if  it  in  fact 
existed,  would  have  on  rent,  interest  and  wages. 

Imagine  the  world  to  consist  of  an  island  which  had 
gradually  attained  a  population  of  one  hundred  mil- 
lions, under  conditions  similar  to  those  which  prevail 
in  the  real  world ;  also  that  this  island  was  capable  of 
furnishing  food  in  abundance  for  only  one  hundred 
million  inhabitants. 

At  first,  while  there  was  plenty  of  unused  land  on 
the  island,  both  employers  and  employees  would  be 
largely  independent  of  land  owners.  If  there  were 
only  ten  millions  of  people,  there  would  be  more  land 
on  which  food  could  be  produced  at  a  minimum  ex- 
penditure of  capital  and  labor  than  there  would  be 
laborers  to  cultivate  it,  and  fewer  employing  capital- 
ists and  laborers  in  proportion  to  the  amount  of  land 
would  bid  against  each  other  for  the  privilege  of 
using  it.  This  would  be  the  case,  of  course,  not  only 
as  to  agricultural  lands  and  laborers,  but  also  as  to 
all  lands  and  all  laborers.  Hence,  it  would  seem  that 
both  wages  and  interest  would  then  be  higher  than 


Effect  of  a  Real  Scarcity  of  Land  107 

after  population  had  become  more  dense,  and  com- 
petition among  those  wanting  the  use  of  land  more 
intense. 

When  the  population  of  the  island  was  ten  millions 
there  would  be  only  one-tenth  as  many  employing 
capitalists  bidding  for  the  use  of  land,  and  only  one- 
tenth  as  many  laborers  seeking  employment  on  it,  as 
when  the  population  had  increased  to  one  hundred 
millions.  As  population  increased,  the  demand  for 
land  would  increase  in  proportion,  and  competition 
between  capitalists  and  capitalists,  and  between 
laborers  and  laborers,  for  land  on  which  to  produce 
wealth,  would  becom.e  sharper  and  sharper.  There- 
fore, a  constant  increase  in  the  value  of  land  and  in 
the  price  to  be  paid  for  the  use  of  it  would  neces- 
sarily follow.  The  employing  capitalist  would  be 
compelled  to  give  up  more  and  more  of  the  profits  of 
his  enterprise  to  the  land  owner  in  order  to  compete 
successfully  with  other  employers  in  bidding  for  the 
privilege  of  using  land;  this  would  tend  to  reduce 
interest.  The  emploj^ee  would  also  be  compelled  to 
accept  employment  at  lower  and  lower  wages.  It 
would  seem,  therefore,  that  the  more  unused  land  on 
the  island  in  proportion  to  population,  the  cheaper 
the  land  would  be,  and  the  higher  interest  and 
wages. 

Experience  as  well  as  theory  proves  that  this 
would  be  the  case.  Thus,  when  "Uncle  Sam"  had  a 
fertile  farm,  conveniently  at  hand,  of  one  hundred 
sixty  acres  free  of  price,  for  every  man  who  would 
settle  upon  and  improve  it,  land  in  this  country  was 
cheap,  interest  was  high,  and  wages  were  higher 
than  anywhere  else  in  the  world.  Labor  unions  and 
strikes  were  then  almost  unknown  in  America,  al- 


108  The  Problem  of  the  Unemployed 

though  common  at  that  time  in  England.  As  the 
country  become  more  thickly  settled,  however,  land 
became  dearer,  interest  fell,  and  wages  tended  to 
fall ;  then  came  organized  labor,  strikes,  lockouts  and 
boycotts. 

The  fact  that  cheap  land  and  high  wages  go  hand 
in  hand  is  a  matter  of  common  knowledge  and  obser- 
vation. In  1901,  the  Merchants'  Association  of  New 
York  sent  a  committee  to  Texas  to  examine  its 
resources  and  economic  conditions,  and  ascertain, 
among  other  things,  whether  cotton  mills  could  be 
profitably  operated  in  that  State  or  not.  The  report 
was  unfavorable,  for  the  reason,  as  stated,  that  the 
immense  bodies  of  cheap  and  fertile  land  which  were 
accessible  to  labor  in  Texas  would  attract  the  mill 
operatives  to  the  more  profitable  employment  which 
agricultural  pursuits  afforded  under  such  circum- 
stances. It  was  also  stated,  as  a  matter  of  course, 
that  with  increase  of  population  and  increase  in 
the  value  of  lands,  conditions  would  change;  wages 
would  fall,  and  doubtless  mills  could  then  be  oper- 
ated with  profit. 

It  is  interesting  to  note,  in  this  connection,  that 
Charles  Dickens,  writing  of  his  visit  to  this  country 
in  1842,  in  "American  Notes,"  states  that  during  his 
entire  trip  he  never  saw  a  beggar.  The  incidental 
references  made  by  him  to  the  working  people  of  the 
Northern  States  indicate  at  that  time  a  compara- 
tively ideal  relationship  between  employer  and  em- 
ployee. So,  also,  the  speeches  in  Congress  of  Henry 
Clay  and  others  during  the  first  half  of  the  last  cen- 
tury, in  advocacy  of  a  protective  tariff,  show  a  com- 
paratively prosperous  and  satisfactory  condition  of 
the  laboring  population.     The  argument  then  was, 


Effect  of  a  Real  Scarcity  of  Land  109 

not  that  a  protective  tariff  would  make  wages  higher 
or  that  it  was  needed  for  this  purpose,  but  that, 
wages  being  already  so  much  higher  in  this  country 
than  in  Europe,  the  tariff  was  necessary  for  the  pro- 
tection, not  of  the  working  man,  but  of  the  manu- 
facturer, "against  the  competition  of  foreign  pauper- 
made  goods." 

The  following  is  a  curious  example  of  the  univer- 
sally admitted  fact  that  cheap  lands  cause  high 
wages :  Edward  Gibbon  Wakefield,  who  visited  this 
country  in  the  first  quarter  of  the  last  century,  was 
horrified  at  the  "scarcity  of  labor"  in  the  United 
States,  and  at  the  high  wages  paid  for  labor  and  the 
independence  of  laborers.  He  sincerely  believed  that 
the  "better  classes"  who  might  emigrate  to  tiie  Aus- 
tralian Colonies  should  be  protected  against  such 
unpleasant  conditions.  In  order,  therefore,  to  bring 
about  in  those  new  countries  such  "salutary  scarcity 
of  employment  as  would  give  cheap  and  abundant 
labor,"  he  proposed  to  the  proper  authorities  that  the 
land  from  the  start  should  be  held  at  a  price  so  high 
as  to  put  it  beyond  the  reach  of  any  of  the  class  of 
farmers  who  were  willing  to  work  with  their  own 
hands.  The  money  received  by  the  state  in  this  way, 
he  proposed  to  devote  to  paying  the  passage  to  the 
Australian  Colonies  of  suitable  immigrants  carefully 
selected  from  the  "lower  classes." 

A  policy  of  this  character  was,  in  fact,  to  some 
extent,  pursued  for  many  years  by  the  English  Gov- 
ernment in  the  disposition  of  the  public  lands  of  its 
colonies.  In  1890,  however,  a  radical  change  was 
adopted  in  New  Zealand,  on  the  coming  into  power 
of  the  Liberal  party,  which  has  since  been  in  control 
in  that  colony.    The  holding  of  large  bodies  of  land 


110  The  Problem  of  the  Unemployed 

in  idleness  and  the  investment  of  wealth  in  its  pur- 
chase was  made  less  profitable  by  a  graduated  land 
tax.  Laws  were  also  passed,  by  means  of  which  idle 
lands  in  private  hands  could  be  condemned  by  the 
government  and  leased  to  actual  settlers,  suitable 
provision  being  made  for  the  compensation  of  former 
owners.  In  this  way  it  became  possible  for  a  settler 
to  invest  safely  all  of  his  capital  in  improvements  and 
in  the  actual  cultivation  of  land,  without  sinking  any 
part  of  it  in  its  purchase  or  in  the  payment  of  land 
purchase  money  indebtedness.  When  this  legislation 
was  inaugurated  New  Zealand  was,  and  had  been 
for  some  years  before,  suffering  from  acute  "hard 
times."  A  change  for  the  better  at  once  ensued,  and 
a  period  of  prosperity  immediately  began,  which  was 
not  appreciably  interrupted  by  the  world-wide  panic 
of  1893.  In  New  Zealand  today  wealth  is  more  evenly 
distributed,  wages  are  higher,  and  prosperity  is  more 
nearly  universal  than  in  any  other  country  in  the 
world.  And  so  it  must  always  be.  Where  unused 
land  is  cheap  and  easy  of  access,  wages  must  be  high ; 
where  such  lands  are  dear  and  hard  to  obtain,  wages 
must  be  low.  What  would  be  the  effect  on  wages  and 
trade  generally  if  all  unused  land,  no  matter  where 
situated,  was  always  cheap  and  easy  of  access  to  cap- 
ital and  labor  ? 

Recurring  to  the  island,  let  it  be  assumed  that 
when  its  population  reached  one  hundred  millions, 
every  acre  of  land  suitable  for  the  purpose  was  so 
fully  and  properly  used  that  the  greatest  amount  of 
food  was  being  produced  with  the  least  expenditure 
of  labor,  just  enough  of  it  being  obtained  to  give 
every  inhabitant  an  abundant  supply.  Under  such 
circumstances,  so  long  as  the  population  of  the  island 


Effect  of  a  Real  Scarcity  of  Land  111 

did  not  exceed  one  hundred  millions,  neither  the 
theory  of  Malthus  nor  the  theory  of  diminishing  re- 
turns could  have  any  application.  Up  to  this  time 
there  could  be  no  real  scarcity  of  land,  because,  in 
point  of  fact,  under  intelligent  husbandry,  land  with 
constant  cultivation  becomes  more  fertile  rather 
than  less  fertile ;  and  this,  too,  v/ithout  additional 
net  expense  to  the  husbandman.  But  let  the  popu- 
lation of  the  island  increase  beyond  one  hundred  mil- 
lions, and  continue  to  increase,  then  for  the  first  time 
in  the  history  of  such  a  world  the  theory  of  Malthus 
and  the  theory  of  diminishing  returns  would  begin 
to  apply  under  inexorable  natural  conditions.  If 
there  were  a  real  scarcity  of  the  raw  material  which 
land  affords,  some  would  have  to  do  without,  nor 
could  this  be  wholly  avoided  by  any  change  in  laws 
regulating  the  right  of  access  to  land.  Interest  and 
wages  would  then  necessarily  fall,  but  this  would 
result  from  the  laws  of  nature,  and  not  from  those  of 
human  enactment. 

Suppose  ten  million  laborers  were  engaged  in  pro- 
ducing food  on  this  island  when  its  population  was 
one  hundred  millions.  Let  the  population  increase 
20%  and  twelve  million  laborers  would  then  com- 
pete against  each  other  for  agricultural  employment, 
although  only  ten  million  could  be  employed  to  the 
best  advantage.  There  being  no  unused  land  for  the 
additional  two  million  laborers  to  turn  to,  competi- 
tion among  the  twelve  million  for  employment  would 
become  exceedingly  intense,  and  the  struggle  for 
existence  would  compel  each  to  underbid  the  other 
when  possible.  If  the  laws  of  supply  and  demand 
were  allowed  to  act  without  restrictions,  the  wages 
of  the  lowest  class  of  agricultural  laborers  would 


112  The  Problem  of  the  Unemployed 

inevitably  fall  to  the  point  at  which  the  laborer  could 
hardly  subsist.  Since  a  considerable  portion  of  all 
laborers  would  be  engaged  in  agriculture,  it  is  evi- 
dent that  the  wages  of  all  other  laborers  would  fall 
in  the  same  proportion.  Abnormally  low  wages  in 
one  class  of  employment  will  cause  laborers  to  leave 
it  and  crowd  into  other  lines  of  employment,  and 
this  will  go  on  until  wages  in  all  lines  have  fallen  to 
a  corresponding  level.  If  a  cause  producing,  say,  a 
50%  reduction  of  wages  applies  to  one-third  or  even 
less  of  the  laboring  population,  then  the  wages  of  all 
laborers  must  fall  in  much  the  same  proportion,  and 
when  the  equilibrium  is  reached  all  wages  will  be 
lower. 

Competitive  bids  for  the  use  of  land,  under  the 
circumstances,  by  laborers  with  barely  enough  cap- 
ital for  self -employment,  and  by  those  able  to  employ 
other  laborers,  would  be  influenced  also  by  the  low 
rate  of  wages.  This  would  make  land  higher ;  hence 
the  price  paid  land  owners  for  land,  or  its  use,  would 
constantly  tend  to  increase  with  increase  of  popula- 
tion, while  wages  would  tend  to  decrease.  The  land 
owner  would  naturally  and  inevitably  in  the  end  get 
the  entire  product,  less  the  smallest  amount  on  which 
laborers  could  subsist,  and  less  the  least  amount  of 
interest  sufficient  to  induce  owners  or  holders  of  cap-  . 
ital  to  employ  labor.  This  would  be  the  case  except 
as  the  natural  effect  of  the  law  of  supply  and  demand 
might  be  modified  somewhat  by  the  causes  referred 
to  in  the  preceding  chapters.  Not  only  would  em- 
ployees bid  against  one  another  for  employment,  but 
parties  desiring  to  use  their  own  or  borrowed  capital, 
as  employers,  would  also  bid  against  one  another  for 
the  use  of  land  on  which  to  employ  labor ;  hence  the 


Ejfect  of  a  Real  Scarcity  of  Land  113 

wages  of  employers  as  well  as  employees  would  also 
fall.  In  other  words,  the  rewards  of  efforts  on  the 
part  of  employers  as  well  as  of  employees  would 
grow  smaller  and  smaller  as  the  demand  for  land 
increased.  And  not  only  so,  but  capitalists  as  such 
would  be  compelled  to  accept  lower  and  lower  rates 
of  interest  from  employers,  in  view  of  the  constantly 
lessening  opportunities  to  engage  in  profitable 
wealth-producing  enterprises;  hence  interest  would 
also  fall. 

What  is  stated  here  as  the  result  of  an  increasing 
demand  for  land  caused  by  increasing  population,  is 
not  mere  theory.  The  proof  of  it  is  found  by  com- 
paring wages,  rates  of  interest,  land  values  and 
opportunities  for  profitable  enterprises  prevailing  in 
thickly  settled  countries,  like  England,  for  instance, 
with  those  found  in  thinly  settled  ones,  like  the 
United  States  and  the  English  colonies. 

Wages  under  conditions  resulting  from  a  real 
scarcity  of  land  would  thus  automatically  fall  to  the 
starvation  point,  or  to  a  point  so  low  that  any  fur- 
ther reduction  would  mean  the  destruction  of  the 
laborer,  while  land  values  and  rent  would  rise  to 
enormous  proportions.  This  would  be  so,  no  matter 
to  what  extent  inventions  increased  the  amount  of 
wealth  produced.  The  laborer,  by  means  of  improve- 
ments in  labor-saving  processes  now  undreamed  of, 
might  be  able  to  produce  on  an  average  more  wealth 
in  an  hour,  than  his  forefathers  produced  in  a 
month,  yet  the  portion  of  it  which  he  would  be  per- 
mitted to  retain  would  be  comparatively  trifling, 
provided  the  law  of  supply  and  demand  were  per- 
mitted to  control.  This  would  be  the  case,  no  matter 
to  what  extent  increase  in  the  number  of  hours  con- 


114  The  Problem  of  the  Unemployed 

stituting  a  day's  work,  or  improvements  in  the  char- 
acter of  the  working  man  and  in  faithfulness  towards 
his  employer,  added  to  the  amount  of  wealth  which 
he  created.  But  it  is  absurd  to  suppose  that  any 
change  for  the  better  in  the  moral  nature  of  the 
working  man  would  be  possible  under  such  condi- 
tions, no  matter  what  efforts  were  made  for  his  spir- 
itual regeneration.  For  men  would  then  fight  for 
the  chance  of  employment  as  wolves  fight  for  a  bone, 
and  even  as  multitudes  of  half  starved  human  beings 
now  occasionally  fight  for  jobs  on  the  docks  of  Lon- 
don— and  even  as  working  men  are  already  begin- 
ning to  fight  each  other  in  the  same  way  in  free 
America.     Note  the  following  newspaper  clipping: 

"The  nine  months'  struggle  of  the  machinists 
and  boilermakers  of  the  Chicago,  Lake  Shore  & 
Eastern  Railroad  against  a  10  per  cent  wage 
reduction  is  at  an  end.  The  company  announced 
that  if  the  unions  would  call  off  their  strike  it 
would  reinstate  as  many  of  the  former  em- 
ployees as  possible  at  the  lower  wages.  The 
result  was  a  stampede  of  more  than  half  the  400 
strikers,  which  caused  fighting  and  brought  out 
the  police.  The  company  hired  100  of  the  old 
men.  *  *  *  Nq  strike  breakers  will  be  dis- 
charged." 

It  is  apparent  that  as  time  passed  and  the  scarcity  - 
of  land  increased  on  the  island,  the  more  and  more 
miserable  and  dependent  would  become  the  condition 
of  the  laborer.  The  relation  between  land  owners 
and  capitalists  on  the  one  hand  (capitalists  being  in 
large  part  land  owners  also),  and  employees  on  the 
other  hand,  would  soon  practically  become  that  of 
masters  and  slaves.  Society  would  then  be  made  up 
of  millionaires  and  billionaires  on  one  side,  living  iri 


Effect  of  a  Real  Scarcity  of  Land  115 

luxury  such  as  is  now  but  partially  approached, 
whose  sordid  pleasures  would  be  ministered  to  by 
armies  of  cringing  servants.  On  the  other  side, 
seething  millions  of  working  men  would  fight  each 
other  like  beasts  for  the  mere  privilege  of  employ- 
ment, except  as  such  horrible  conditions  might  be 
alleviated  to  some  extent  by  the  Benevolent  Feudal- 
ism of  which  Mr.  Ghent  has  written.  It  is  also  evi- 
dent that  these  conditions  would  be  approached  long 
before  there  was  such  scarcity  of  food  as  to  render 
semi-starvation  in  the  nature  of  things  the  necessary 
lot  of  a  single  human  being. 

Suppose  the  surface  of  the  earth  from  pole  to  pole 
were  owned  by  a  single  person,  or  by  a  corporation 
like  the  Standard  Oil  Company.  It  would  then  be 
possible  for  the  owner  at  any  time,  by  simply  refus- 
ing to  permit  the  use  of  lands  at  present  unused,  to 
quickly  bring  about  the  results  above  described.  The 
refusal  of  land  owners  generally  to  permit  the  use  of 
unused  land,  except  on  terms  which  would  give  them 
all  the  wealth  which  could  be  produced  on  it  over  and 
above  what  was  necessary  to  enable  the  laborer  to 
live  and  work,  would  bring  about  the  same  conse- 
quences. Is  it  clear  that  preconcerted  action  on  the 
part  of  land  owners  must  be  necessary  in  order  to 
bring  about  such  conditions?  Would  not  the  simple 
law  of  supply  and  demand,  as  population  increased, 
suffice  to  produce  them?  Who  shall  say  that  the 
necessities  of  the  workers,  the  fact  that  the  unem- 
ployed are  even  now  eagerly  bidding  for  the  places 
of  the  employed,  have  not  already  produced  condi- 
tions in  part  like  those  above  described,  and  that  we 
are  not  rapidly  approaching  the  full  measure  of 
them? 


116  The  Problem  of  the  Unemployed 

Thomas  Carlyle  once  said  to  an  American :  "Ye 
may  boast  o'  yer  dimocracy,  or  any  ither  'cracy,  or 
any  kind  o'  poleetical  roobish ;  but  the  reason  why 
yer  laboring  folk  are  so  happy  is  thot  ye  have  a  vost 
deal  o'  land  for  a  verra  few  people." 


CHAPTER  IX. 

EFFECT  OF  AN  ARTIFICIAL  SCARCITY  OF  LAND  ON  RENT, 
INTEREST  AND   WAGES. 

THE  ultimate  condition  of  employees,  caused  by 
the  scarcity  of  land  on  the  island  referred  to  in 
the  preceding  chapter,  would  come  gradually.  The 
investment  of  wealth  in  the  purchase  of  land  would 
by  degrees  bring  about  an  artificial  scarcity  of  land, 
with  all  the  effects  of  a  real  scarcity,  long  before 
there  was  such  scarcity  in  fact.  This  is  what  has 
already  happened  in  the  real  world,  for  the  real 
world  differs  only  from  the  one  in  the  illustration  in 
being  an  island  with  fifteen  hundred  million  instead 
of  one  with  a  hundred  million  inhabitants.  If  we 
open  our  eyes  to  the  matter,  we  can  see  on  every  hand 
at  present  the  same  effects  flowing  from  an  artificial 
scarcity  of  land  which  would  result  from  a  real 
scarcity. 

It  was  shown  in  Chapter  VI  that  as  yet  there  is  no 
real  scarcity  of  land  in  any  country;  that  in  the 
United  States,  many  times  its  present  population 
could  be  supported  without  waste  of  human  labor, 
and  that,  in  fact,  probably  less  than  one  acre  in  five 
of  the  area  of  this  country  is  so  utilized  as  to  produce 
the  greatest  amount  of  wealth  with  the  least  amount 
of  labor.  The  price,  however,  at  which  unused  land 
is  often  held  brings  about  an  artificial  scarcity  of  it, 
almost  as  marked  in  its  effects  upon  interest  and 
wages  as  if  such  land  were  blotted  out  of  existence 
altogether. 


118  The  Problem  of  the  Unemployed 

Some  years  ago,  during  a  "boom"  in  California, 
unimproved  lands,  useful  at  that  time  only  for  rais- 
ing wheat  worth  sixty  cents  a  bushel,  went  up  to  two 
hundred  fifty  dollars  per  acre.  No  farmer  could  buy 
this  land,  pay  current  wages,  and  make  more  than 
two  or  three  per  cent  on  the  entire  investment.  It  is 
evident  that  most  of  such  unused  land  would  remain 
unused  until  the  price  fell.  Let  the  price  fall,  how- 
ever, to  fifty  dollars  an  acre,  and  additional  plows 
and  reapers  would  begin  to  move ;  let  it  become  free 
land,  and  in  a  few  seasons  labor  would  be  employed 
in  the  cultivation  of  nearly  every  acre  of  it,  and  the 
communities  in  which  it  was  located  would  present 
unparalleled  scenes  of  prosperity. 

The  price  which  must  be  paid  for  unused  land  cre- 
ates an  artificial  scarcity  of  it.  That  this  may  con- 
stitute as  great  an  obstacle  to  the  employment  of 
capital  and  labor  as  a  real  scarcity,  is  shown  in  the 
opening  up  to  homesteaders  of  the  Territory  of 
Oklahoma  a  few  years  ago.  Up  to  that  time,  capital 
and  labor  of  white  men  could  not  be  employed  law- 
fully upon  this  Indian  reservation.  While  this  was 
the  case,  the  land  in  this  territory  might  just  as  well 
have  been  covered  with  ten  feet  of  water,  so  far  as 
its  availability  for  the  relief  of  an  overcrowded  labor 
market  was  concerned.  This  may  be  said  with 
almost  equal  truth  in  regard  to  the  unused  wheat 
lands  in  California,  so  long  as  the  price  demanded 
remained  at  two  hundred  fifty  dollars  per  acre.  And 
so,  also,  as  to  all  unused  lands,  if  they  are  held  out 
of  use  to  gratify  an  owner,  or  if  the  price  demanded 
is  so  high  that  after  the  payment  of  current  wages, 
current  interest  on  the  entire  investment  cannot  be 
made.    As  to  lands  thus  held  out  of  use,  it  is  correct, 


Effect  of  an  Artificial  Scarcity  of  Land      119 

from  an  economic  standpoint,  to  consider  them 
eliminated  from  the  earth's  surface.  But  be  the  pur- 
chase price  great  or  small,  it  always  helps  to  create 
an  artificial  scarcity  of  land,  and  this  is  the  greatest 
of  all  obstacles  to  the  employment  of  capital  and 
labor.  It  is  the  one  thing,  and,  as  will  be  shown,  the 
only  thing,  which  prevents  wages  from  naturally 
rising  with  the  increasing  wealth-producing  power 
of  the  wage  earner. 

Oklahoma,  with  its  two  million  acres,  was  an  unin- 
habited wilderness,  with  a  single  railroad  running 
through  it.  In  Texas,  bordering  on  the  south,  and  in 
Kansas  on  the  north,  there  were  then,  as  at  the  pres- 
ent time,  forty  million  acres  and  more  of  unused 
land  of  equally  as  good  quality,  already  within  set- 
tled and  civilized  communities,  adjacent  to  improved 
highways,  and  convenient  to  schools,  churches  and 
markets.  For  this  reason,  these  unused  lands  of 
Kansas  and  Texas,  found  often  in  thickly  settled 
neighborhoods,  in  themselves  presented  far  more 
inviting  fields  for  the  employment  of  capital  and 
labor  than  the  land  in  the  wilderness  of  Oklahoma. 
In  themselves,  they  oflfered  greater  inducements  to 
men  to  leave  the  congested  ranks  of  labor  in  cities 
and  towns  for  employment  in  the  cultivation  of  the 
soil.  But  the  lands  in  Kansas  and  Texas  were  not 
free.  The  prices  at  which  they  were  held  as  effect- 
ually put  them  beyond  the  reach  of  the  overwhelming 
majority  of  homeseekers,  including  workers  in  cities 
and  towns,  who  would  gladly  go  to  the  soil  for  em- 
ployment if  they  could  improve  their  condition  by 
doing  so,  as  though  the  lands  had  no  existence,  or  as 
though  they  were  covered  by  inland  seas.  Not  so, 
however,  as  to  the  free  lands  of  Oklahoma.     When 


Stfv> 


120  The  Problem  of  the  Unemployed 

it  was  announced  that  on  a  certain  day  and  at  a 
certain  hour,  the  Oklahoma  Reservation  would  be 
opened  to  homeseekers  in  parcels  of  one  hundred 
sixty  acres  each,  free  and  without  price,  many  times 
as  many  applications  for  land  were  filed  as  there 
were  parcels  of  it  to  be  distributed.  Fifty  thousand 
applicants,  most  of  whom  had  little  capital,  gathered 
on  the  borders  of  the  Territory  to  make  a  wild  rush 
when  the  signal  guns  were  fired,  for  the  chance — one 
in  five — of  obtaining  an  opportunity  to  apply  labor 
directly  to  the  soil.  Within  a  single  season  after 
this  rush  occurred,  sixty  thousand  people  were  living 
on  these  lands.  The  law  required  them  to  do  this, 
and  the  great  majority  wanted  the  land  for  homes 
and  not  for  speculative  purposes.  The  demand  for 
it  would  have  been  only  a  little  less  intense  had  there 
been  no  hope  of  profiting  from  its  future  unearned 
increment.  But  for  the  opening  up  of  this  land  and 
the  rendering  of  it  available  to  capital  and  labor,  a 
majority  of  these  people  would  now  be  competing 
against  one  another  and  against  others  for  employ- 
ment in  cities  and  towns,  and  thus  assisting  in  glut- 
ting the  labor  market. 

And  yet  there  are  hundreds  upon  hundreds  of  mil- 
lions of  acres  of  unused  or  but  partially  used  land  in 
the  United  States,  on  which  labor  can  today  be  more 
profitably  employed  than  on  the  Oklahoma  lands 
when  first  opened  to  settlement.  A  drive  of  a  few 
minutes  to  the  suburbs  and  beyond  of  any  city  will 
disclose  thousands  of  acres  of  such  land.  It  is  found 
everywhere,  inviting  the  small  capitalist  and  the 
poorly  paid  laborer  to  the  more  profitable  employ- 
ment which  its  cultivation  would  afford,  except  for 
the  price  demanded  for  access  to  it.    But  as  to  the 


Effect  of  an  Artificial  Scarcity  of  Land      121 

overwhelming  majority,  this  price  is  prohibitive. 
Yet  the  price  is  all  which  stands  in  the  way  of  an 
inexhaustible  demand  for  labor  upon  unused  land. 
Otherwise  on  what  reasonable  theory  can  the  rush 
for  free  land  to  the  wilderness  of  Oklahoma  and  the 
rapidity  of  the  settlement  of  that  territory  be  ex- 
plained? What  else  prevents  a  rush  to  unused  land 
lying  within  a  few  minutes'  ride  of  every  idle  capi- 
talist and  every  idle  laborer  in  the  country? 

If  these  unused  opportunities  for  employment,  at 
the  very  doors  of  banks  congested  with  idle  capital, 
and  in  the  very  midst  of  laborers  engaged  in  cut- 
throat competition  for  employment,  were  condemned 
by  the  government  under  its  power  of  eminent  do- 
main, or  otherwise  turned  loose  as  the  lands  of  Okla- 
homa were  loosened,  would  labor  then  have  to  beg 
for  employment,  or  regard  it  a  favor  to  be  employed  ? 
If  the  employer  could  invest  all  his  wealth  in  the 
means  and  appliances  necessary  for  the  employment 
of  labor  on  these  unused  lands  without  being  com- 
pelled to  spend  often  the  greater  part  of  it  in  the 
purchase  of  the  land  itself,  would  there  ever  be  any 
lack  of  capital  for  the  full  employment  of  labor — 
would  there  be  any  talk  then  about  an  insufficient 
wage  fund  and  nonsense  of  that  kind  ?  As  it  is  now, 
more  capital  often  is  required  for  the  purchase  of 
places  on  which  to  employ  labor,  than  for  the  pur- 
chase of  the  tools  necessary  for  its  employment. 
Thus,  sites  alone  for  the  employment  of  labor  in 
Greater  New  York,  if  fully  utilized,  would  cost  the 
employing  capitalists,  even  at  present  valuations, 
over  four  billion  dollars.  What  wonder  then  that 
labor's  share  of  the  product,  as  well  as  that  of  cap- 
ital, is  so  small  comparatively,  when  land  alone  in 


122  The  Problem  of  the  Unemployed 

great  cities  is  capitalized  at  the  rate  of  millions  of 
dollars  per  acre,  and  everywhere  else  in  like  propor- 
tion, on  the  basis  of  which  capital  and  labor  must 
pay  tribute  for  the  bare  privilege  of  employment ! 

The  overshadowing  feature  of  men's  social  rela- 
tions is  the  fact  that  wages  do  not  keep  pace  with 
progress ;  that  wages  do  not  rise  in  proportion  to  the 
constantly  increasing  wealth-producing  efficiency  of 
the  wage  earner,  and  that  men  willing  to  work  and 
begging  for  work  are  so  often  unable  to  obtain  work. 
These  are  apparently  the  most  puzzling  of  sociological 
phenomena,  and  the  ones  of  all  others  v/hich  the 
political  economist  is  called  upon  to  explain.  Yet  the 
explanation  is  as  simple  and  as  easily  comprehended 
by  any  one  free  from  prejudice  as  the  explanation 
which  Gallileo  gave  for  the  movement  of  the  planets. 
It  is  the  great  underlying  truth  on  which  any  correct 
system  of  political  economy  must  be  based,  and  it  is 
this :  Wages  do  not  rise,  but,  on  the  contrary,  nat- 
urally tend  to  fall,  with  increase  of  population,  not- 
withstanding increase  of  wealth,  and  men  beg  for 
employment  in  the  midst  of  idle  lands  simply  because 
wealth  can  be  profitably  invested  in  the  purchase  of 
unused  land.  And  the  reverse  of  this  will  be  found 
to  be  equallj'-  true :  If  wealth  could  not  be  profitably 
invested  in  the  purchase  of  land,  wages  would  rise 
and  continue  to  rise  with  every  improvement  in 
labor-saving  devices.  Thus,  it  v/ill  be  found  that 
improvements,  as  well  as  increase  of  population, 
under  free  competition  and  the  unobstructed  opera- 
tion of  the  laws  of  supply  and  demand,  can  only  in 
the  long  run  increase  the  value  of  land  and  the  por- 
tion of  the  product  going  to  land  owners.  They  do 
not  increase  either  interest  or  wages,  or  the  portion 


Effect  of  an  Artificial  Scarcity  of  Land      123 

going  to  capitalists  and  laborers.  This  being  true,  it 
follows  that,  if  it  could  be  so  arranged  that  land 
would  get  nothing,  the  entire  product  would  then  go 
to  capital  and  labor  in  the  form  of  interest  and 
wages ;  and  it  can  be  made  equally  clear  that  if  this 
were  done,  every  improvement  which  increased  the 
efficiency  of  labor  would  in  the  same  proportion  nat- 
urally and  inevitably  increase  the  wages  of  the  la- 
borer. 

If  land  were  made  free,  by  the  application  of  the 
power  of  eminent  domain,  and  then  kept  free  by  the 
application  of  the  taxing  power,  wealth  could  not  be 
profitably  invested  in  land;  then  capital  as  such 
would  be  absolutely  helpless  and  wholly  dependent 
on  the  labor  of  employers  and  employees.  Compe- 
tition between  capitalists  bidding  for  labor  would  be 
as  intense  as  it  is  now  between  laborers  bidding  for 
employment.  At  present,  however,  capital  can  snap 
its  fingers  at  labor.  It  can  buy  land.  This  means 
that  the  man  who  would  otherwise  be  compelled  to 
remain  a  capitalist  can  invest  his  wealth  with  profit 
in  simply  buying  the  privilege  of  collecting  tribute 
from  capital  and  labor.  He  is  not  compelled  to  use 
or  permit  the  use  of  all  of  his  capital  in  the  employ- 
ment of  labor  as  would  otherwise  be  the  case. 

At  the  end  of  any  period  sufficient  for  its  accumu- 
lation, people  will  have  saved,  say,  fifty  million  dol- 
lars, and  the  wealth  of  the  country  will  have  been 
increased  to  that  extent.  There  will  then  be  addi- 
tional commodities  of  the  value  of  fifty  million  dol- 
lars produced  by  labor,  stored  in  the  warehouse  of 
the  world,  to  be  used  and  invested  so  as  to  produce 
incomes  for  tho.se  whose  ownership  of  this  additional 
wealth  is  evidenced  by  money  in  their  possession. 


124  The  Problem  of  the  Unemployed 

Since  this  wealth  has  been  saved  and  added  to  an 
existing  stock  of  wealth,  all,  or  the  equivalent  of  all 
of  it,  must  be  invested,  in  land  or  in  new  enterprises 
requiring  the  employment  of  labor.  Every  laborer 
thus  employed  in  a  new  enterprise  or  in  the  enlarge- 
ment of  existing  enterprises  will  add  to  the  total 
number  of  laborers  previously  employed,  and  deprive 
none  of  them  of  employment.  Now,  without  burden- 
ing the  mind  by  trying  to  think  how  it  could  be  accom- 
plished, or  whether  it  ought  to  be  accomplished,  let 
it  be  assumed,  for  the  sake  of  the  argument  only, 
that  all  unused  land  was  free  land,  and  that  none  of 
this  additional  fifty  million  dollars  of  wealth  could 
be  invested  in  its  purchase.  In  other  words,  that  the 
owners  of  this  wealth  could  not  profitably  use  it  in 
buying  land.  It  follows  then  that  practically  all  of 
it  would  be  invested  as  capital  in  labor-employing 
enterprises,  and  hence  labor  would  be  in  greater 
demand  than  would  be  the  case  if  any  part  of  it 
could  be  used  in  buying  land. 

Again,  since  all  unused  coal  beds  and  mineral 
deposits  and  unused  tracts  of  land  suitable  for  farms 
and  residences  and  stores  and  factories,  etc.,  would 
be  as  free  to  any  one  who  would  use  them  as  were 
the  free  lands  of  Oklahoma,  the  eagerness  of  cap- 
italists themselves  to  employ  labor  so  as  to  take 
advantage  of  these  wealth-producing  opportunities 
to  be  found  in  every  community  would  also  bring 
about  a  great  demand  for  labor.  Nor  would  labor 
be  wasted  any  longer  by  the  failure  of  laborers  and 
employers  to  select  in  every  instance  the  best  located 
unused  land  on  which  labor  could  be  applied  to  the 
greatest  advantage. 


Effect  of  an  Artificial  Scarcity  of  Land      125 

The  forcing  thus  of  all  wealth  for  income  produc- 
ing purposes  to  be  used  as  capital ;  the  removal  of  all 
the  obstacles  to  the  employment  of  capital  and  labor 
which  have  been  pointed  out,  and  which  would  follow 
if  unused  land  were  made  free,  and  the  enabling  of 
the  employer  in  all  cases  to  select  from  unused  land 
the  portion  of  it  on  which  the  greatest  amount  of 
wealth  could  be  produced  with  the  least  expenditure 
of  labor,  would  not  only  result  in  an  increase  in  the 
demand  for  labor,  but  also  in  an  enormous  increase 
in  the  amount  of  wealth  produced.  From  this  would 
follow  an  increase  in  the  amount  of  wealth  saved, 
and  since  this  could  be  profitably  invested  only  as 
capital,  the  wage  fund  of  the  world  would  be  in- 
creased in  like  proportion.  With  more  and  more 
wealth  thus  seeking  investment,  and  with  practi- 
cally no  other  way  for  its  profitable  investment 
except  as  capital  in  labor-employing  enterprises, 
with  all  unused  opportunities  open  and  free  of  cost 
for  the  use  of  capital  and  labor,  how  would  it  be 
possible  for  rates  of  interest  to  rise  also,  with  im- 
provements in  labor-saving  processes?  Such  im- 
provements would  have  the  effect  of  increasing  the 
amount  of  capital  to  be  invested  in  the  employment 
of  labor,  thus  intensifying  competition  among  its 
holders  seeking  such  investments,  to  the  benefit  of 
both  employer  and  employee. 

If  land  were  free,  therefore,  every  improvement  in 
labor-saving  processes  would  have  the  ultimate  effect 
of  reducing  rates  of  interest,  and  since  the  entire 
portion  of  wealth  produced  by  human  effort  which  is 
now  divided  between  the  factors  of  land,  capital  and 
labor,  would  then  be  divided  between  capital  and 
labor   only,    it   follows    inevitably   that   the   share 


126  The  Problem  of  the  Unemployed 

received  by  labor  would  also  constantly  increase,  and 
the  share  received  by  capital  as  measured  by  rates 
of  interest  would  as  certainly  in  the  long  run  con- 
stantly decrease,  with  improvements  in  wealth- 
producing  processes.  And  so  the  laborer,  including 
the  employer  as  well  as  the  employee,  would  finally 
reap  the  full  reward  of  his  labors. 


CHAPTER  X. 

LABOR'S  DEPENDENCE    ON   CAPITAL. 

THE  obstacles  to  the  employment  of  capital  and 
labor  to  which  attention  has  been  called,  arise 
from  and  are  generally  supposed  to  be  inseparably 
connected  with  the  private  ownership  of  land.  While 
the  necessity  for  such  ownership  is  admitted  by 
political  economists  of  the  new  school,  no  attempt 
is  made  by  them  to  disguise  the  consequences  flowing 
from  it.  And  therein  lies  the  difference  between  a 
true  science  and  a  spurious  one — between  a  system 
which  explains  things  and  shows  the  causes  of  im- 
portant phenomena,  and  one  which  confuses  things, 
hardly  mentions  such  phenomena,  and  makes  little 
or  no  attempt  to  account  for  them. 

Of  what  value  is  a  conglomerate  mass  of  discon- 
nected statements  and  finely  drawn  distinctions  re- 
lating to  sociological  topics,  thrown  together  with 
no  apparent  object  in  view,  and  without  an  earnest 
purpose  to  get  at  the  causes  of  the  phenomena  re- 
ferred to  in  the  introductory  chapter  of  this  book? 

Just  as  learned  professors  in  the  days  of  Galileo 
may  have  taught  varied  and  confusing  systems  of 
astronomy  without  calling  attention  to  the  move- 
ments of  the  planets,  so  learned  professors  today 
are  teaching  varied  and  confusing  systems  of  po- 
litical economy  without  showing  the  fundamental 
difference  between  property  in  land  and  property 
in  the  fruits  of  industry.     Not  so,  however,  as  to 


128  The  Problem  of  the  Unemployed 

those  of  the  new  school;  while  proposing  no  sub- 
stitute for  private  ownership  of  land,  they  do  not 
ignore  its  far-reaching  effects  on  the  social  relations 
of  men.  It  may  be  that  the  evils  connected  with  it, 
which  have  been  pointed  out,  as  well  as  others 
which  will  be  referred  to,  are  inevitable;  it  may 
be  that  the  simple  change  in  the  application  of  the 
forces  of  government  hereafter  explained,  which 
would  remove  these  evils,  cannot  be  sanctioned  by 
the  moral  law  without  compensation  to  land  owners 
and  that  the  plan  suggested  later  for  such  compensa- 
tion is  impracticable.  But  even  if  this  be  so,  why 
should  teachers  of  political  economy  hesitate  to  pro- 
mulgate the  truth  ?  Is  the  fear  of  arousing  an  unjus- 
tifiable attack  upon  property  rights  a  sufficient 
excuse  for  obscuring  the  truth?  Truth  need  not 
be  denied,  because  ive  think  it  may  lead  to  error. 
Why,  then,  shrink  from  a  full  and  frank  discussion 
of  the  effects  of  private  ownership  of  land  on  the 
demand  for  labor  and  upon  the  distribution  of 
wealth  ? 

The  reader  has  now  a  general  idea  of  the  trend 
of  the  argument.  Summarized  in  part,  it  is  as  fol- 
lows: Raw  material  must  first  be  produced  from 
land,  by  farmers  and  miners,  before  laborers,  who 
handle  and  fashion  it  as  merchants,  mechanics  and 
manufacturers,  can  be  employed.  There  cannot  be 
a  demand  for  all  the  additional  workers  annually 
seeking  employment  with  increase  of  population, 
unless  the  labor  of  perhaps  a  fourth  of  them  be 
applied  directly  to  land  which  was  before  unused  or 
but  partially  used.  It  is  evident  that  the  higher  the 
price  demanded,  either  as  purchase  money  or  as 
rent,  for  access  to  this  unused  land,  the  greater  will 


Labor's  Dependence  on  Capital  129 

be  the  obstacle  to  the  employment  of  these  additional 
workers;  the  lower  the  price,  the  less  will  be  the 
obstacle ;  while  if  no  price  were  charged,  and  unused 
land  were  free  land,  this  obstacle  to  employment 
would  disappear  entirely.  It  is  also  evident  that 
legislative  forces  so  applied  as  to  sustain  and 
increase  the  price  of  unused  land  must  increase  the 
obstacles  to  employment;  while  the  same  forces  so 
applied  as  to  decrease  the  price  of  unused  land  must 
lessen  and  ultimately  remove  these  obstacles. 

Political  economists  of  the  orthodox  school,  as 
well  as  ultra  socialists,  not  only  ignore  the  natural 
effects  of  the  private  ownership  of  land,  but  also 
the  consequent  obstacles  to  employment  pointed  out 
in  the  preceding  chapters.  Many  of  them  insist  that 
the  scale  of  wages  depends  upon  the  volume  or 
amount  of  capital,  and  that  relief  to  employees  will 
come  and  can  come  only  with  increase  of  capital. 
The  fact  that,  as  a  general  rule,  in  new  communities 
where  there  is  the  least  capital,  wages  of  both 
employer  and  employee  are  highest,  while  in  old 
and  thickly  settled  communities  where  there  is  the 
most  capital  in  proportion  to  population,  wages  are 
lowest,  is  not  referred  to;  and  the  connection 
between  cheap  land  and  high  wages  and  dear  land 
and  low  wages  is  hardly  noticed.  Agreeing  with 
the  socialists,  many  teachers  of  political  economy 
apparently  hold  that  wages  of  employees  generally 
are  fixed  by  what  labor  receives  in  immense  manu- 
facturing establishments  where  enormous  amounts 
of  capital  are  used,  and  where  the  subdivision  of 
labor  is  carried  to  the  greatest  extreme.  Hence 
they  teach  that  labor  is  abjectly  dependent  upon 
capital.     Like  the  socialists,  they  fail  to  see  that 


130  The  Problem  of  the  Unemployed 

the  scale  of  wages  must  be  fixed  by  what  labor  can 
earn  under  the  simplest,  rather  than  under  the  most 
complex,  conditions  of  employment.  They  fail  to 
see  that  the  independence  of  the  laborer  depends  on 
the  amount  of  capital  necessarily  required  to  grow 
vegetables  rather  than  on  the  amount  needed  for 
the  construction  of  locomotive  engines. 

Labor  is  not,  in  the  nature  of  things,  abjectly  de- 
pendent upon  capital.  Three-fourths  or  more  of  the 
products  of  the  farm  are  still  produced  with  appli- 
ances of  the  cheapest  and  simplest  character.  The 
poultry  crop  is  but  a  few  millions  less  valuable  than 
the  wheat  crop,  while  the  hay  crop  sometimes  almost 
doubles  the  value  of  the  cotton  crop.  The  small 
farmer  who  combines  in  himself  a  laborer,  landlord 
and  capitalist,  will  always  have  a  greater  income 
in  proportion  to  the  capital  invested  and  labor 
expended  than  the  so-called  capitalistic  farmer.  The 
old  saying  that  "He  who  by  the  plow  would  thrive, 
himself  must  either  hold  or  drive,"  is  as  true  today 
as  regards  four-fifths  or  more  of  farmers,  as  when 
first  written  by  Poor  Richard  a  hundred  and  fifty 
years  ago.  The  tendency  is  constantly  toward 
smaller  farms  and  more  intensive  systems  of  culti- 
vation. In  this  connection,  of  course,  a  farmer  pure 
and  simple  is  referred  to,  and  not  a  landlord  who 
farms  other  farmers,  nor  does  "capital"  include  the 
wealth  sunk  in  the  purchase  of  the  privilege  of 
using  the  land  on  which  the  farms  are  located. 

Four-fifths  and  more  of  the  farmers  of  this  coun- 
try, each  working  for  himself  and  independent  of 
any  employing  capitalist  or  any  landlord,  will  natur- 
ally produce  more  wealth  than  if  working  for  large 
capitalists  or  even  for  the  captains  of  industry  of  a 


Labor's  Dependence  on  Capital  131 

socialistic  commonwealth.  While  large  capital  and 
a  division  of  labor  may  be  often  necessary  in  the 
interest  of  economy  to  meet  competition  in  the  man- 
ufacture and  distribution  of  commodities,  very  little 
capital  is  needed  in  the  production  of  cotton  and 
most  of  the  food  crops.  Neither  is  the  amount  of 
capital  required  for  any  branch  of  agriculture  so 
large  that  an  industrious  and  capable  farmer  could 
not  speedily  accumulate  it  with  his  individual  labor 
if  he  has  free  access  to  valuable  unused  land.  This 
has  been  demonstrated  in  hundreds  of  thousands  of 
instances  on  the  fertile  plains  of  the  West. 

A  man  with  a  few  dollars'  worth  of  tools  and 
means  of  support  for  a  few  months,  a  comparatively 
trifling  amount  of  capital,  and  easily  within  the 
reach  of  vast  numbers  of  employees  in  cities  and 
towns,  could  make  a  bountiful  living  on  the  valuable 
unused  lands  near  at  hand  to  which  attention  has 
been  called,  without  the  aid  of  any  other  capital,  if 
he  had  free  access  to  them.  The  importance  of  this 
fact  is  ignored  by  orthodox  political  economists  as 
well  as  by  socialists. 

In  order,  then,  to  determine  the  extent  of  labor's 
necessary  dependence  upon  capital,  we  must  see  how 
the  relationship  between  the  two  would  stand  if  both 
had  free  access  to  unused  land.  Let  us  then  imagine 
conditions  which  would  prevail  if  the  natural  order 
were  observed  in  the  use  and  in  the  appropriation 
of  land. 

If  there  were  no  artificial  obstacles  to  prevent  it, 
the  most  fertile  or  most  favorably  situated  land 
would  always  be  first  selected  for  use.  There  would 
then  be  few,  if  any,  of  the  intervening  stretches  of 
more  valuable  unused  land  between  lands  in  use. 


132  The  Problem  of  the  Unemployed 

found  on  every  hand.  There  would  rarely  if  ever 
be  such  spaces  in  cities  and  towns.  Land  most  con- 
veniently situated  and  most  valuable  for  use  would 
no  longer  be  withheld  from  use.  Capital  and  labor 
would  no  longer  pass  by  vacant  lots  and  unused 
farming  lands,  coal  beds  and  mineral  deposits,  and 
apply  energy  to  lands  more  remote  and  naturally 
less  valuable.  The  waste  of  effort  occasioned  by 
the  present  custom  would  be  saved  and  the  aggre- 
gate amount  of  wealth  produced  would  be  vastly 
increased. 

Let  it  be  assumed,  then,  for  the  purpose  of  argu- 
ment only,  that  the  taxing  power  of  the  govern- 
ment was  so  exercised  as  to  make  it  unprofitable  to 
withhold  land  from  the  use  to  which  it  was  best 
adapted,  and  that  no  one  could  afford,  as  a  business 
proposition,  to  own  land  without  putting  it  to  such 
use.  If  this  were  the  case,  vacant  land  would  always 
be  free  land.  Under  such  conditions,  there  would 
be  none  of  the  intervening  spaces  between  business 
houses  and  between  residences  and  between  culti- 
vated or  improved  fields  to  which  attention  has 
been  called.  Moving  from  the  center  of  any  city, 
improved  business  lots  would  join  improved 
residence  grounds,  and  the  latter  would  join  culti- 
vated or  improved  fields  which  would  extend  in 
almost  unbroken  masses  to  the  unimproved  pasture 
lands  and  unused  lands  beyond,  except  as  such 
natural  order  might  be  modified  by  difference  in  the 
fertility  of  soils  or  other  natural  causes.  The  land 
beyond  and  adjoining  the  last  improved  or  culti- 
vated fields  would  thus  be  practically  free  land,  open 
to  the  use  of  whoever  cared  to  take  a  deed  for  it  from 
the  State,  and  use  and  improve  it. 


Labor's  Depend e7ice  on  Capital  133 

Let  it  also  be  assumed,  for  illustration  only,  that 
the  tax  was  so  adjusted  as  to  give  the  government 
approximately  the  unearned  increment  or  increase  in 
value  of  land  resulting  from  increase  of  population 
and  progress  generally.  The  State  would  then  take, 
in  the  form  of  a  tax,  what  the  land  owner  now  takes 
in  the  form  of  rent,  according  to  the  economic  defini- 
tion of  rent  heretofore  given.  In  the  division  of 
the  wealth  produced,  the  portion  attributable  to  land 
as  rent  would  then  go  to  the  government  in  the 
payment  of  a  tax.  At  present,  it  goes  to  an  indi- 
vidual in  the  payment  of  rent.  Of  course,  the  tax 
would  be  levied  on  the  value  of  the  land  alone  in 
lieu  of  all  other  taxes,  without  regard  to  improve- 
ment. The  tax  on  land  would  be  so  adjusted  from 
year  to  year  as  to  take  practically  the  entire  un- 
earned increment,  and  hence  no  one  would  have  the 
slightest  desire  to  accept  a  patent  to  land  from  the 
government  for  speculation  or  investment  pur- 
poses. Hence,  unused  land  would  always  be  free 
land.  When  with  increase  of  population,  the  neces- 
sity for  the  use  of  such  land  arose,  no  private 
owner  would  stand  in  the  way  of  its  use,  and  thus 
the  purchase  price  of  unused  land,  the  greatest  of  all 
obstacles  to  employment,  would  disappear. 

Let  it  be  further  assumed,  for  illustration  only, 
that  under  the  conditions  above  shown,  there  would 
always  be  free  land  thus  conveniently  located  for  the 
small  capitalist  and  laborer  to  go  to.  This  land 
v/ould  not  lie  in  a  roadless  wilderness,  remote  from 
markets,  schools  and  neighbors.  It  would  always 
adjoin  a  compact  and  thickly  settled  community, 
v/ith  macadamized  roads  at  every  farmer's  door,  and 
all  the  social  and  economic  advantages  which  come 


134  The  Problem  of  the  Unemployed 

with   density   of  population.      The   settler   upon   it 
would  at  once  become  a  member  of  such  a  com- 
munity, and  a  participant  in  its  advantages.     It 
would  be  land  from  which  the  bulk  of  the  product 
would  often  go  directly  to  nearby  consumers,  unaf- 
fected by  trusts  and  combinations  in  restraint  of 
trade.    What  such  advantages  are  worth  is  apparent 
from  the  fact  that  men  will  often  pay  hundreds  of 
dollars  per  acre  for  raw  land  thus  situated,  rather 
than  twenty   dollars   an   acre  for  land   equally  as 
fertile  twenty  miles  farther  from  a  neighboring  city. 
This  difference  in  price  arises  in  part  from  the  fact 
that  while  a  day's  labor  on  the  remote  land  will 
produce,  say,  a  dollar's  worth  of  wealth,  the  same 
amount  of  labor  on  the  other  land  will  produce,  say, 
three   times   as   much.      Yet,    under  the   condition 
stated,  this  three  dollar  a  day  land  would  at  first 
be  practically  rent  free.     The  tax,  to  begin  with, 
would  be  but  nominal.     It  would  only  increase  as, 
with  increase  of  population  and  material  progress, 
labor  applied  to  the  land  would  become  more  effect- 
ive, and  then  the  increase  of  the  tax  would  only  be 
sufficient  to  give  the  State,  instead  of  the  individual, 
the  benefit  of  the  unearned  increment.     The  values 
created  by  the  community  would  thus  go  to  the  com- 
munity instead  of  to  individuals. 

With  an  abundance  of  unused  land  so  well  situ- 
ated to  be  had  on  such  terms,  how  absurd  to  sup- 
pose that  labor  would  then  be  abjectly  dependent 
upon  capital,  even  though  plants  requiring  an  invest- 
ment of  hundreds  of  millions  of  dollars  might  be 
necessary  in  many  kinds  of  enterprises !  How  could 
the  wages  of  employees  in  plants  of  any  kind  be 
forced  below  the  scale  of  wages  fixed  by  what  labor 


Labor's  Dependeyice  on  Capital  135 

could  make  on  rent  free  land?  What  possible  com- 
bination of  employing  capitalists  could  compel 
employees  to  accept  less  than  laborers  would  make 
on  available  free  lands  ?  Many  laborers  would  be  able 
to  employ  themselves  practically  without  the  aid 
of  capitalists,  and,  speedily  creating  their  own  capi- 
tal, they  would  become  personally  independent  of 
all  capitalists.  Since  agriculture  is  the  simplest, 
most  easily  learned  and  most  generally  followed  of 
all  trades,  the  independence  of  agricultural  laborers 
would  mean  the  independence  of  all  laborers. 

The  success  of  vegetable  patches  on  vacant  city 
lots  proves  that  the  earnings  of  even  common  labor- 
ers on  valuable  free  land  would  exceed  those  now 
usually  earned  by  ordinarily  skilled  laborers.  No 
one  can  doubt  that  with  free  access  to  nearby  unused 
lands,  more  labor  would  be  employed,  and  that  labor 
would  naturally  become  less  dependent  upon  capital. 
The  unemployed  laborer  himself  might  not  go  to  the 
soil,  but  if  conditions  were  such  as  to  make  its  culti- 
vation highly  profitable  to  other  laborers  and  to 
small  capitalists,  enough  of  his  competitors  would 
do  so  to  largely  increase  the  demand  for  his  labor, 
no  matter  what  his  employment  might  be. 

It  follows  then  that  the  extent  of  labor's  depend- 
ence on  capital  does  not  rest  upon  the  amount  of 
capital  required  to  carry  on  manufacturing  and 
commercial  enterprises.  It  depends  simply  on  the 
amount  actually  needed  to  enable  the  laborer  to  pro- 
duce wealth  on  nearby  unused  lands ;  and,  exclusive 
of  the  price  of  the  land,  this  amount  of  capital  is 
so  small  as  to  be  within  the  reach  of  every  laborer 
with  moderate  forethought  and  prudence.  Labor 
existed  before  capital,  and  unaided,  it  brought  forth 


136  The  Problem  of  the  Unemployed 

capital.  Given  free  access  to  unused  lands,  and  the 
laborer  would  be  as  independent  of  the  capitalists 
under  the  most  complex  as  under  the  most  simple 
conditions  of  society.  Experience  tends  to  prove 
this  to  be  true.  In  new  countries,  where  the  least 
amount  of  wealth  is  needed  for  the  purchase  of  con- 
veniently located  unused  land,  wages  are  highest; 
in  old  countries,  where  the  most  is  needed,  wages  are 
lowest. 

Increase  of  wages  arbitrarily  by  trade  union  meth- 
ods, like  increase  of  prices  produced  by  trusts, 
means  gain  for  some  and  loss  for  others;  but  the 
independence  of  the  laborer,  when  brought  about 
naturally  by  the  unrestricted  operation  of  the  law 
of  supply  and  demand,  means  greater  v/ages  for 
employers  as  well  as  employees,  and  greater  pros- 
perity for  workers  of  every  kind. 

The  thought  thus  suggested  for  the  purpose  of 
showing  to  what  extent  labor  is  necessarily  depend- 
ent upon  capital,  will  be  more  fully  developed  in 
subsequent  pages.  Before  leaving  it,  however,  one 
question  will  be  briefly  answered.  The  query  is 
this:  While  the  conditions  referred  to  might  exist 
and  produce  the  results  described,  in  a  new  and 
thinly  settled  country,  what  application  can  it  have 
to  those  countries  in  which  there  is  little  or  no 
unused  or  but  partially  used  land  suitable  for  agri- 
cultural purposes?  The  answer  simply  is,  that  in 
every  country  in  the  world  there  is  an  overwhelm- 
ing abundance  of  such  unused  land,  and  it  is  not 
likely  that  there  ever  will  be  any  scarcity  of  it,  con- 
sidering the  probable  results  of  the  application  of 
science  to  agriculture.     When  unused  land  is  not 


Labor's  Dependence  on  Capital  137 

literally  close  at  hand,  modern  transportation^,  facili- 
ties can  always  make  it  practically  so. 

Where  are  the  thickly  settled  countries  to  which 
the  question  mentioned  above  is  supposed  to  apply? 
The  population  of  India  is  but  165  to  the  square 
mile ;  of  China,  150 ;  Japan,  a  little  more  than  360 ; 
France,  188 ;  the  islands  of  Great  Britain,  371.  The 
population  of  the  State  of  Massachusetts,  which  is 
418  to  the  square  mile,  slightly  exceeds  in  density 
that  of  Great  Britain.  Holland  is  perhaps  the  only 
country  in  the  world,  except  Belgium,  where  the 
population  is  more  dense  than  in  the  State  of  Massa- 
chusetts, and  it  has  only  about  500  to  the  square 
mile." 

The  census  of  1910,  regarding  land  in  Massa- 
chusetts, illustrates  to  a  great  extent  the  situation 
in  all  countries  where  population  is  supposed  to 
crowd  means  of  subsistence.  There  are  5,144,960 
acres  of  land  in  Massachusetts,  of  which  only 
1,164,501  acres  are  classed  as  improved  farm  lands. 
Thus  only  about  one-fifth  of  the  land  in  one  of  the 
most  densely  populated  countries  in  the  world  is  in 
actual  cultivation.  A  study  of  the  figures  presented 
by  the  census  shows  that  about  1,400,000  acres  in 

*The  enormous  amount  of  unused  land  which  careful  investi- 
gation brings  to  light  in  the  most  densely  settled  countries  is 
shown  from  the  following  extract  taken  from  Thomas  F.  Mil- 
lard's article  on  "The  Financial  Prospects  of  Japan"  in  the 
September  number,  1905,  of  Scribner's  Magazine: 

"It  will  probably  surprise  many  people  to  learn  that  there  is 
now  only  about  one-half  the  arable  land  of  .Japan  in  cultivation. 
Some  time  before  the  war  the  Japanese  Government  appointed 
a  commission  to  inquire  into  the  state  of  agriculture  in  the 
realm,  which  in  due  time  reported  certain  facts  bearing 
thereon.  Commenting  upon  the  findings  of  this  commission, 
one  of  the  leading  and  more  conservative  native  journals  had 
this  to  say:  'According  to  tlie  latest  statistics  compiled  by 
the    Geological    Investigation    Bureau    of    the    Department   ol 


138  The  Problem  of  the  Unemployed 

and  near  cities  and  towns  are  unused  for  any  agri- 
cultural purpose  whatsoever,  on  which  about  nine- 
tenths  of  the  population  of  the  State,  or  3,125,365 
people,  live.  This  is  enough  to  give  the  family  unit 
of  five  people  2.22  acres  of  land  for  a  home  site, 
after  allowing  one-third  of  the  total  area  for  public 
parks  and  streets.  Yet  the  lots  in  actual  use  for 
residence  and  business  purposes  in  the  cities  and 
towns  of  Massachusetts  do  not  probably  average  the 
one-tenth  part  of  two  and  twenty-two  hundredths 
acres  of  land  to  the  family  unit  of  five.  But  say  that 
the  allowance  per  family  for  home  purposes  ought 
not  to  be  less  than  an  area  of  100  by  100  feet,  includ- 
ing business  as  well  as  residence  lots,  and  it  follows 
that  at  least  six-sevenths  of  the  1,400,000  acres  of 
land  referred  to  is  wholly  unused.  In  other  words, 
in  Massachusetts  there  are  considerably  over  a  mil- 
lion acres  of  land  in  and  adjoining  cities  and  towns, 
spoiled  for  any  present  productive  use  because  its 
owners  believe  that  in  the  succeeding  live,  twenty, 
or  perhaps  fifty  years,  some  of  it  may  be  used  as  sites 
for  buildings.  The  laborer  and  the  capitalist  are 
unable  to  use  this  land  for  agricultural  purposes 
because  of  the  high  price  demanded  for  it,  and  so 

Agriculture  and  Commerce,  the  present  total  area  of  culti- 
vatd  fields  in  Japan  forms  only  13  2-3  per  cent  of  her  total 
area.  Comparing  this  with  the  ratios  of  cultivated  land  in 
foreign  countries  it  will  be  seen  that  the  land  cultivated  by 
countries  in  Europe  covers  from  one-third  to  one-half  of  the 
total  land  area.  *  *  *  From  the  above  (figures)  it  will  be 
seen  that  Japan  still  has  48  per  cent,  of  the  total  land  area 
which  can  be  turned  into  cultivated  land.  There  is  at  present 
about  five  million  cho  (a  cho  is  equal  to  2.45  acres)  of  culti- 
vated land  in  the  country,  leaving  some  four  and  a  half 
million  cho  to  be  still  cultivated.  Should  efforts  be  made 
to  turn  this  arable  land  to  advantage,  the  increase  of  popu- 
lation is  little  to  be  feared.'  " 


Labor's  Dependence  on  Capital  139 

most  of  it  is  practically  abandoned  to  the  speculator 
and  to  the  mere  land  holder.  Yet  of  all  land  in  the 
State,  this,  with  few  exceptions,  is  the  most  valuable 
for  farming  purposes. 

As  in  Massachusetts,  so  everywhere  in  connection 
with  thriving  cities  and  towns,  an  area  from  five  to 
ten  or  twenty  times  greater  than  that  on  which  the 
population  would  be  concentrated  under  natural  con- 
ditions is  excluded  from  use.  In  Massachusetts 
the  amount  thus  excluded  exceeds  all  the  land  in 
crop  cultivation  in  the  State. 

Had  the  natural  order  been  observed  in  Massa- 
chusetts, in  the  use  as  well  as  in  the  appropriation  of 
land — had  the  land  most  suitable  for  use  always  been 
first  used,  doubtless  most  of  the  farmers  of  that  State 
would  now  be  located  on  the  most  valuable  and  con- 
veniently situated  1,000,000  unused  acres  in  the 
suburbs  of  cities  and  towns,  instead  of  upon  lands 
remote  from  centers  of  population,  the  remainder 
of  the  unimproved  land  in  the  State  would  still  be 
unimproved,  the  only  difference  being  that  nearly 
all  the  cultivated  lands  would  then  lie  adjacent  to 
compactly  built  cities  and  towns.  Of  course,  this  is 
but  an  approximation  of  what  would  really  have 
happened,  but  in  the  main,  the  lands  of  Massachu- 
setts would  have  been  settled  in  the  manner  stated. 
The  best  and  most  valuable  land,  considering  the 
fertility  of  the  soil  and  its  proximity  to  centers  of 
population,  would  always  have  been  first  used,  and 
unused  land  would  always  have  been  the  least  valu- 
able for  use.  Under  the  effects  of  the  taxing  power 
applied  in  the  manner  which  has  been  suggested, 
the  unimproved  land  in  Massachusetts,  amounting 
to  millions  of  acres,   would  have  been   practically 


140  The  Problem  of  the  Unemployed 

free  land,  or  lands  used  as  pasturage,  the  tax  on 
which  would  be  nominal.  And  this  free  land  would 
generally  have  commenced  where  the  cultivated 
fields  ended,  and  where  labor  could  produce  as  much 
wealth  as  when  it  is  now  applied  to  land  held  at 
hundreds  of  dollars  per  acre. 

A  macadamized  road  at  the  farmer's  door  v/ill 
often  alone  add  ten  per  cent,  and  more  to  his  gross 
income,  and  quadruple  the  fund  from  which  his  pos- 
sible savings  must  come.  He  can  haul  his  crops 
over  it  when  wet  weather  suspends  work  upon  the 
farm,  and  at  such  tim.es,  especially,  it  facilitates  the 
exchange  of  visits  between  neighbors,  and  adds  im- 
mensely to  the  enjoyment  of  life.  It  also  enables 
him  constantly  to  increase  the  richness  of  his  soil 
by  easily  placing  upon  it  the  fertilizing  material 
often  obtained  without  price  from  neighboring  cities 
and  towns. 

Compare  the  lot  of  a  man  located  on  land  of  this 
character  with  that  of  the  average  husbandman  on 
his  oft  mud-bound  and  storm-bound  farm.  The 
former  has  almost  all  the  advantages  of  a  city, 
including  perhaps  a  telephone,  a  trolley  line,  and 
electric  light  and  power,  and  the  best  of  educational 
facilities  close  at  hand ;  while  the  latter  lives  remote 
from  neighbors,  schools  and  churches,  deprived  not 
only  of  many  economic  advantages,  but  also  of  social 
pleasures  which  would  add  so  much  to  the  happiness 
and  contentment  of  himself  and  family.  What  won- 
der that  so  many  of  the  sons  and  daughters  of  farm- 
ers crowd  the  trades  and  professions  in  cities  and 
towns !  What  else  could  be  expected  when  the  social 
instincts  of  mankind  are  taken  into  account? 


Labor's  Dependence  on  Capital  141 

There  is  no  economic  necessity  for  the  hard  and 
dreary  lives  which  so  many  farmers  and  their  wives 
and  children  are  forced  to  live  on  lonely  farms.  Less 
than  half  the  money,  for  instance,  now  expended  in 
the  construction  and  maintenance  of  dirt  roads 
would  put  macadamized  roads  and  a  telephone  line 
to  every  farmer's  home,  together  with  electric 
light  and  power  service,  if  all  farmers  were  located 
on  the  lands  best  situated  for  farming  purposes,  and 
the  remainder  devoted  to  pasture  and  fruit.  Not 
only  so,  but  the  same  amount  of  labor  wholly  applied 
to  such  lands,  under  such  advantages,  would  produce 
double  and  quadruple  the  wealth  at  present  obtained 
from  much  of  the  farming  lands  in  use. 

The  enormous  areas  of  unused  lands  near  the 
centers  of  population  is  not  exaggerated.  Careful 
observation  will  convince  the  most  skeptical  on  this 
point.  Start  from  the  business  center  of  any  aver- 
age city  in  America  and  note  the  proportion  of 
improved  to  unimproved,  or  but  partially  improved, 
land  between  two  parallel  lines  a  quarter  of  a  mile 
or  so  apart,  running  into  the  country.  Extend  these 
lines  until  a  region  is  finally  reached  where  the 
price  of  land  is  based  upon  the  wealth  which  it  is 
capable  of  producing  when  devoted  to  agricultural 
uses.  Or,  in  other  words,  extend  them  until  land 
is  reached,  the  value  of  which  is  not  inflated  by  the 
hope  of  its  some  time  being  used  for  other  than 
agricultural  purposes.  In  every  instance,  it  will  be 
found  that  not  one  acre  in  five,  often  not  one  in  ten 
or  twenty,  between  these  lines,  is  used  for  any  pro- 
ductive purpose  whatever. 

If  the  natural  order  of  settling  upon  and  using 
land  were  observed,  unused  lands  would  be  found 


142  The  Problem  of  the  Unemployed 

everywhere  in  abundance  immediately  adjacent  to 
thickly  settled  communities.  Given  conditions  under 
which  land  could  not  be  profitably  appropriated  in 
advance  of  any  economic  demand  for  it  for  actual 
use, — let  the  forces  of  government  be  so  applied  that 
all  unused  or  but  partially  used  land  would  be  prac- 
tically free  land,  free  land  then  could  always  be 
found  where  the  laborer  upon  it  would  be  able  to 
enjoy  from  the  very  start  the  social  and  economic 
advantages  of  a  densely  settled  community.  On  such 
land  most  laborers,  as  heretofore  shown,  could  pro- 
duce wealth  without  the  aid  of  any  so-called  capi- 
talist, and  the  wages  earned  by  them  upon  it  would 
many  times  exceed  what  can  now  be  earned  on  the 
free  land  which  can  only  be  found  at  present  in  the 
heart  of  a  wilderness. 

The  necessary  dependence  of  labor  upon  capital, 
and  of  the  laborer  upon  the  capitalist,  can  only  be 
ascertained  when  both  are  supposed  to  have  access 
to  free  land  under  the  natural  conditions  which 
have  been  described.  Under  such  conditions,  the 
agricultural  laborer  would  always  be  practically 
independent  of  the  capitalist  as  well  as  the  landlord, 
and  his  independence  would  bring  about  the  inde- 
pendence of  all  laborers.  Under  the  natural  condi- 
tions thus  described,  employers  would  compete  for 
the  privilege  of  employing  labor,  even  as  laborers 
now  compete  for  the  privilege  of  being  employed, 
and  wages  would  rise  accordingly. 


CHAPTER  XL 

THE  WAGE  FUND  OR  PERMANENT  WEALTH. 

CAPITAL  is  not  only  wealth  used  to  produce 
more  wealth,  but  it  is  also  wealth  consumed 
in  the  production  of  wealth.  The  machine,  no  mat- 
ter how  strongly  built,  finally  wears  out,  and  is 
replaced  by  a  new  one.  Wealth  in  the  form  of  stat- 
uary may  last  for  centuries,  but  wear  and  tear,  moth 
and  rust  and  decay  finally  prevail,  and  the  process 
of  consumption  as  to  everjrthing  produced  by  human 
hands  is  at  last  completed.  If  wealth  is  not  being 
consumed  as  capital,  it  is  because  it  has  reached  the 
final  stage  had  in  mind  during  the  process  of  its  cre- 
ation, and  is  being  consumed  in  the  gratification  of 
human  desires  with  no  ulterior  aim  in  view.  Thus, 
the  reaping  machine,  which  is  instrumental  in  pro- 
ducing the  wheat  which  makes  the  flour  which  makes 
the  bread,  is  capital ;  but  the  bread  on  the  table  of 
the  consumer  is  not  capital — it  is  simply  wealth. 

Things  of  the  same  class  may  often  be  consumed, 
either  as  capital  or  as  wealth  only,  according  to  cir- 
cumstances. The  horse  dragging  the  plow  is  being 
consumed  in  the  production  of  wealth,  and  is  capital ; 
the  horse  which  merely  ministers  to  the  pleasure  of 
its  owner  is  being  consumed  like  food,  and  is  not 
capital.  The  race  horse,  by  its  efforts  on  the  race 
track,  adds  nothing  to  the  stock  of  wealth  in  the 
world,  although  it  may  enable  some  men  to  obtain 
wealth  produced  by  other  men.     Wealth  which  is 


144  The  Problem  of  the  U7iemployecl 

not  used  to  produce  more  wealth  may  be  conven- 
iently referred  to  as  wealth  consumed  in  living  ex- 
penses; wealth  thus  consumed  is  not  capital.  Gen- 
erally speaking,  wealth  is  always  being  consumed, 
either  in  living  expenses,  or  as  capital  in  the  produc- 
tion of  more  wealth.  It  is  unnecessary  to  make 
other  distinction  with  respect  to  it,  since  all  wealth 
is  either  wealth  in  itself  alone,  or  it  is  wealth  used 
to  produce  more  wealth. 

Wealth  saved  by  individuals  takes  the  form  of  cap- 
ital, unless  invested  in  land,  and  most  of  the  wealth 
which  is  not  consumed  as  fast  as  produced  is  used 
as  capital.  The  aggregate  amount  of  capital  in  any 
community  can  be  appropriately  called  the  wage 
fund  of  such  community  or  the  permanent  wealth 
of  the  community.  It  constitutes  the  fund  from 
which  are  drawn  the  tools  and  supplies  used  by 
labor  in  producing  wealth.  It  is  evident,  other 
things  being  equal,  that  the  greater  this  fund,  the 
more  tools  there  are,  the  greater  will  be  the  amount 
of  wealth  produced,  and  that  whatever  tends  to 
lessen  this  fund  also  tends  to  lessen  the  production 
of  wealth. 

One  of  the  most  important  things  to  be  considered 
in  connection  with  the  production  and  distribution 
of  wealth,  is  the  simple  fact  that  wealth  used  as  cap- 
ital, and  consumed  in  the  production  of  wealth, 
increases  the  wage  fund  of  the  world  or  the  amount 
of  capital  in  the  world,  and  makes  it  easier  to  pro- 
duce wealth,  while  wealth  consumed  in  living  ex- 
penses has  the  opposite  effect;  hence  it  follows  that 
the  less  consumed  in  living  expenses,  the  larger  will 
be  the  wage  fund,  and  the  more  wealth  will  be  pro- 
duced by  the  same  amount  of  labor.     A  rich  man 


The  Wage  Fund  or  Permanent  Wealth      145 

may  live  extravagantly,  indulge  himself  without 
limit  in  expensive  cigars,  wines,  race  horses  and 
servants,  and  spend  his  entire  income  on  living 
expenses,  thus  taking  from  instead  of  adding  to  the 
wage  fund ;  while,  on  the  other  hand,  a  so-called 
miserly  man  with  the  same  income  may  spend  three- 
fourths  of  it  on  tenement  houses  and  labor-saving 
appliances  of  various  kinds,  and  thus  add  to  this 
fund.  The  expenditures  of  the  miserly  man  thus 
create  as  great  a  demand  for  labor  as  the  expendi- 
tures of  the  former;  but  in  the  former  case  wealth 
is  simply  destroyed,  while  in  the  latter  case  it  is 
saved  and  made  useful  in  the  production  of  more 
wealth. 

The  so-called  miserly  men  who  economize  and  save 
are  public  benefactors,  as  compared  with  the  less 
provident  whose  incomes  are  entirely  absorbed  in 
living  expenses.  The  miser  may  not  be  so  popular 
with  tailors  and  retail  store-keepers  as  the  spend- 
thrift, but  if  it  were  not  for  the  prudence  and  self- 
denial  exercised  by  the  thrifty  the  wage  fund  would 
be  smaller,  rates  of  interest  would  be  higher,  and  the 
comforts  and  luxuries  of  life  would  not  be  so  com- 
monly enjoyed.  While  the  senseless  extravagances 
of  the  very  rich  create  a  demand  for  labor,  labor 
would  not  be  in  less  demand  if  the  effort  needed  for 
the  production  of  things  consumed  in  ostentatious 
display  were  devoted  to  things  useful  in  the  produc- 
tion of  wealth.  The  rich  man  who  spends  a  million 
dollars,  for  instance,  in  the-  erection  of  comfortable 
and  sanitary  tenement  houses  in  the  slums  of  a  city, 
creates  as  great  a  demand  for  labor  as  if  he  spent  it 
all  on  caterers,  jewelers,  servants  and  dressmakers. 
So  also,  as  to  the  hundreds  of  millions  of  dollars 


146  The  Problem  of  the  Unemployed 

thrown  away  annually  by  the  working  men  of 
America  for  tobacco,  beer  and  whiskey — the  demand 
for  labor  would  not  be  lessened,  if  this  money  were 
saved  and  invested  in  other  things  needed  by  them — 
say,  in  better  houses  and  additional  furniture  for 
wives  and  children ;  while  fewer  men  would  be  em- 
ployed in  such  event  in  the  liquor  business,  more 
would  be  employed  as  carpenters  and  furniture 
makers. 

An  approach  to  equality  in  the  matter  of  incomes 
tends  to  increase  the  wage  fund  or  permanent  wealth 
of  the  world,  while  inequality  in  this  respect  tends 
to  decrease  it.  Thus,  suppose  that  50  out  of  1,000 
families  in  a  given  community  have  an  average 
income  of  $15,000  each,  while  the  average  income  of 
the  remaining  950  is  but  $200  each.  It  is  evident 
that  great  numbers  of  the  poorer  class  would  then  be 
employed  as  servants  in  ministering  to  the  pleasures 
of  the  rich,  and  would  thus  merely  consume  wealth 
without  producing  it;  hence,  the  wealth  produced, 
and  the  portion  of  it  saved  in  such  a  community, 
would  be  much  less  than  if  fewer  of  the  population 
were  employed  as  servants.  It  is  also  apparent  that 
in  such  a  community  energy  would  be  devoted  to  the 
production  of  luxuries,  which,  under  different  condi- 
tions, would  be  devoted  to  the  production  of  labor- 
saving  appliances,  and  nobles  would  vie  with  one 
another  in  splendor  of  equipages,  while  peasants, 
for  want  of  horses,  would  harness  women  to  plows. 
Russia  presents  an  example  of  conditions  which  must 
necessarily  result  from  excessive  inequalities  in  the 
distribution  of  wealth. 

If  every  family  had  an  income  of  not  less  than 
$1,000,  there  would  be  comparatively  few  who,  as 


The  Wage  Fund  or  Permanent  Wealth  147 
personal  servants  of  the  rich,  would  be  mere  con- 
sumers instead  of  producers  of  wealth.  More  labor 
would  also  be  applied  to  the  production  of  comfort- 
able houses,  barns,  domestic  animals  and  agricultural 
implements,  and  less  to  the  production  of  palaces, 
jewelry  and  fine  gowns ;  hence,  the  aggregate  amount 
of  wealth  consumed  in  living  expenses  would  prob- 
ably be  smaller;  in  any  event,  the  amount  added  to 
the  wage  fund  or  permanent  wealth  of  the  world 
would  be  larger.  And  so,  in  fact,  in  countries  where 
wages  are  highest  and  differences  in  incomes  are 
least  marked,  the  amount  of  wealth  per  capita  is 
greatest. 

Although,  as  before  stated,  the  New  Political 
Economy  offers  no  substitute  for  it,  private  owner- 
ship of  land  under  existing  conditions  does  more  to 
check  the  growth  of  the  wage  fund  than  all  other 
causes  combined.  It  not  only  enables  individuals  to 
reap  the  unearned  increment  which  attaches  to  land 
from  increase  of  population,  and  also  to  obtain  from 
capital  and  labor  tribute  money  for  its  use,  but  the 
exchange  of  wealth  for  land  and  for  the  use  of  land 
often  results  in  the  consumption  of  wealth  which 
would  otherwise  be  conserved  and  added  to  the  wage 
fund. 

Since,  however,  the  money  which  the  grantee  or 
the  tenant  pays  for  land,  or  for  the  use  of  land,  is 
ordinarily  spent  or  reinvested,  the  question  may  be 
asked  as  to  how  the  payment  of  rent  or  purchase 
money  for  land  can  really  lessen  the  amount  of 
capital  in  the  world.  The  fact  that  money  paid  for 
land,  or  for  the  use  of  land,  is  put  into  circulation  by 
the  person  receiving  it,  in  the  purchase  of  other 
things,    indicates    nothing.      Money,    as   heretofore 


148  The  Problem  of  the  Unemployed 

explained,  is  like  a  warehouse  receipt.  It  only  evi- 
dences the  amount  of  one's  wealth  on  deposit  in  the 
warehouse  of  the  world.  It  has  no  more  significance 
in  the  transfer  of  wealth  than  the  "chips"  used  in  a 
game  of  poker.  Chips  keep  an  account  of  the  trans- 
fer of  wealth  between  gamblers,  and  money  in  the 
same  way  keeps  an  account  of  the  transfer  of  wealth 
between  those  who  buy  and  sell.  We  care  nothing  for 
the  chips — for  the  money  used  for  convenience  in 
the  transaction.  We  wish  to  know  in  this  connection 
what  ordinarily  becomes  of  the  wealth  actually  given 
in  exchange  for  land,  or  for  the  use  of  land.  While  a 
portion  of  it  may  be  used  as  capital  by  the  grantor  or 
the  landlord,  much  of  it  is  always  consumed  in 
extravagant  living  expenses,  and  wealth  in  enormous 
quantities  is  thus  destroyed  which  would  otherwise 
be  added  to  the  wage  fund.  It  makes  mere  con- 
sumers of  people  who  would  otherwise  be  producers 
as  well  as  consumers.  This  will  appear  from  the 
following  illustration : 

Some  years  ago,  the  lands  containing  coal  beds  and 
mineral  deposits  in  Northern  Alabama,  99%  of 
which  were  wholly  unused,  advanced  in  value  within 
a  few  years  from  a  million  to  fifty  million  dollars. 
Now,  suppose  this  land,  when  it  was  worth  but  a 
million  dollars,  to  have  been  owned  by  a  thousand 
people,  who,  ten  years  later,  sold  it  to  a  thousand 
capitalists  for  fifty  million  dollars.  If  this  did  not 
in  effect  occur,  it  is  nevertheless  illustrative  of  and 
differs  only  in  degree  from  what  is  constantly  occur- 
ring in  every  civilized  community.  Here  a  thousand 
capitalists  paid  a  thousand  land  owners  on  an  aver- 
age fifty  thousand  dollars  apiece,  or  fifty  million 
dollars  in  all,  for  the  bare  privilege  of  producing  coal 


The  Wage  Fund  or  Permanent  Wealth  149 
and  iron  and  wealth  generally  from  unused  lands. 
Recurring  again  to  the  functions  of  money,  and  it 
appears  that  the  payment  of  fifty  million  dollars  for 
this  privilege  signified  that  the  thousand  capitalists 
in  effect  had  teams,  furniture,  steam  engines,  tools, 
food,  clothing,  merchandise  and  other  things  innum- 
erable, in  the  markets  of  the  world,  of  the  value  of 
fifty  million  dollars,  which  they  gave  in  exchange  for 
the  land.  The  money  simply  evidenced  the  fact  of 
the  ownership  of  this  wealth,  and  when  it  passed  to 
the  grantors,  it  gave  the  latter  power  to  draw  from 
the  wage  fund  of  the  world,  in  lots  to  suit,  things  of 
the  aggregate  value  of  $50,000,000.  Had  they  drawn 
ten  million  dollars'  worth  of  gunpowder  and  burned 
it  in  a  grand  celebration,  the  permanent  wealth  of 
the  world  would  have  been  lessened  to  that  extent  as 
one  of  the  consequences  of  this  exchange  of  wealth 
for  land.  The  wage  fund  could  also  have  been  dimin- 
ished in  the  same  way  by  any  other  extravagance  in 
which  the  former  land  owners  might  have  indulged. 
Many  of  them,  who  would  otherwise  have  continued 
to  work  and  produce  wealth,  would  doubtless  then 
have  begun  lives  of  ease  and  luxury  with  retinues  of 
servants  to  minister  to  their  pleasures.  They  and 
their  servants  would  thus  become  simple  consumers 
of  wealth  and  mere  pensioners  on  the  people  at  large, 
and  the  wealth  thus  squandered  would  diminish  the 
wage  fund  of  the  world  as  effectually  as  the  wanton 
burning  of  gunpowder. 

The  wealth  which  men  acquire  from  the  rent  of 
land,  or  from  buying  and  selling  land,  is  not  earned 
by  them,  but  is  wealth  produced  by  others,  which 
they  are  permitted  to  appropriate  and  withdraw 
from  the  wage  fund  and  consume,  if  they  choose  to 


150  The  Problem  of  the  Unemployed 

do  so,  in  living  expenses.  A  man  pays  $10,000  for  a 
tract  of  land  which  in  course  of  time  he  sells  for 
$40,000,  netting  $25,000  on  the  transaction  after 
payment  of  taxes  and  all  expenses.  This  gain  to  him 
of  $25,000 — this  unearned  increment  which  he  indi- 
vidually appropriates — results  from  increase  of  pop- 
ulation and  the  enterprise  of  the  community  in  which 
the  land  is  situated.  He  may  never  have  been  within 
a  thousand  miles  of  it,  or  done  anything  to  add  to  its 
value.  Nevertheless,  the  $25,000  profit  in  the  trans- 
action enables  him  to  draw  from  the  storehouse  of 
the  world,  commodities  of  the  value  of  $25,000,  and 
consume  them  in  increased  living  expenses  for  him- 
self and  family,  or  otherwise,  and  reduce  the  wage 
fund  accordingly.  Or  he  may  live  in  idleness  on  the 
things  thus  withdrawn,  and  thereby  become  a  mere 
pensioner,  his  claim  to  a  pensioner's  support  resting 
on  the  fact  of  his  having,  years  before,  succeeded  in 
forestalling  capital  and  labor  in  the  purchase  of  a 
bounty  of  nature  which  other  people  have  made 
valuable. 

It  may  be  urged,  however,  that  employers  engaged 
in  wealth-producing  enterprises  often  live  in  need- 
less luxury  also,  and  consume  wealth  which  could  be 
saved  and  added  to  the  wage  fund.  This  is  true; 
but  it  does  not  disprove  the  fact  that  the  fund  would 
be  larger  if  individuals  were  not  permitted  to  appro- 
priate the  rent  of  land  and  the  increase  in  the  value 
of  land.  As  well  might  it  be  said  that  since  there 
are  some  leaks  in  a  ship  which  cannot  be  helped,  it  is 
useless  to  consider  those  which  can  be  stopped.  The 
right  to  collect  tribute  money,  and  diminish  the  wage 
fund  by  consuming  in  living  expenses  wealth  pro- 
duced by  others,  would  not  accrue  to  the  land  own- 


The  Wage  Fund  or  Permanent  Wealth  151 
ers,  but  for  the  burden  of  taxation  being  so  adjusted 
as  to  make  it  often  more  profitable  to  invest  wealth 
in  the  purchase  of  land  than  in  the  emploj^ment  of 
labor. 

There  are  in  the  main  but  two  ways  in  which 
accumulated  wealth  can  be  permanently  invested 
for  income-producing  purposes.  One  way  is  to  invest 
it  in  effect  in  machinery,  or  in  other  words  in  capital, 
to  be  used  in  the  employment  of  labor — or  to  loan  it 
to  those  who  will  use  it  for  this  purpose.  The  other 
way  is  to  invest  it  in  land  on  which  to  use  machinery, 
i.  e.,  capital. 

For  its  advantageous  employment  labor  needs  cap- 
ital in  the  form  of  houses,  teams,  tools,  implements, 
paving  upon  highways,  rails  and  ties  and  cuts  and 
embankments  on  railroad  rights  of  way,  rolling 
stock,  ships  and  unnumbered  other  mechanical  appli- 
ances produced  by  human  labor ;  together  with  stocks 
of  food,  clothing  and  merchandise  with  which  to  tide 
labor  over  from  one  harvest  to  another,  and  from  one 
cycle  of  exchange  to  the  next.  The  more  there  are 
of  these  things  which  constitute  the  wage  fund,  the 
greater  will  be  the  prosperity  of  workers  of  every 
kind,  employers  as  well  as  employees.  It  is  evident 
that  the  more  paid  for  land  on  which  to  use  these 
appliances,  the  less  will  there  be  left  with  which  to 
purchase  the  appliances  themselves. 

There  is  no  limit  to  the  extent  to  which  capital  can 
add  to  the  effectiveness  of  labor.  With  more  and 
better  paved  highways,  for  instance,  time  and  effort 
otherwise  frittered  away  would  be  available  for  the 
production  of  additional  wealth.  If  the  wage  fund 
were  larger,  more  labor-saving  devices  would  be  used 
on  the  farms  and  in  the  factories,  shops  and  homes, 


152  The  Problem  of  the  Unemployed 

and  more  wealth  would  be  produced;  yet,  strange 
as  it  may  seem,  labor  is  everyvv^here  diverted  from 
the  making  of  things  which  add  to  the  productive 
powers  of  nations,  and  in  all  countries  the  forces  of 
government  are  so  applied  as  to  encourage  the  pro- 
duction of  luxuries  and  the  maintenance  of  hordes 
of  personal  servitors. 

Imagine  the  increase  in  the  wage  fund  of  the 
v/orld,  and  the  increased  amount  of  wealth  produced, 
if  employing  capitalists  were  not  compelled  to  pay 
land  owners  such  enormous  sums  for  places  on  which 
to  rest  the  tools  of  production.  In  Northern  Ala- 
bama, for  instance,  as  much  if  not  more  wealth  in 
the  aggregate  was  demanded  for  the  privilege  of 
using  the  tools  referred  to  than  the  tools  themselves 
were  worth.  And  so  it  is  everywhere.  The  aggre- 
gate price  demanded  for  land  in  every  community 
equals  or  exceeds  the  value  of  all  the  wealth,  inclu- 
sive of  the  capital  which  rests  upon  it.  On  Manhat- 
tan Island  the  tax  assessment  rolls  show  that  it 
exceeds  it  by  over  two  billion  dollars. 

It  is  the  size  of  the  wage  fund  which  determines, 
also,  the  relative  strength  as  well  as  the  relative 
wealth  of  nations.  If  employing  capitalists  were  not 
required  to  buy  from  individuals  the  privilege  of  pro- 
ducing wealth  on  the  soil  of  Japan,  for  instance;  if 
the  obstacles  to  the  employment  of  labor  which  have 
been  pointed  out  were  removed,  and  the  wage  fund 
of  that  country  permitted  to  increase  as  it  naturally 
would  under  such  circumstances,  the  expense  of  its 
war  with  Russia  would  have  been  a  mere  bagatelle 
compared  with  the  increased  amount  of  wealth  which 
would  then  be  produced. 


The  Wage  Fund  or  Permanent  Wealth  153 
There  may  be  no  help  for  it,  but  the  burden  of 
private  ownership  of  land  has  a  more  depressing 
effect  upon  industry  and  enterprise  than  war,  pesti- 
lence and  famine.  The  pressure  from  this  burden 
is  never  relaxed,  nor  is  it  lightened  by  material 
progress ;  on  the  contrary,  it  is,  if  anything,  intensi- 
fied by  it  and  rendered  less  endurable. 


CHAPTER  XIL 
THE  DISTRIBUTION  OF  WEALTH. 

CAUSES  AFFECTING  THE  DIVISION  OF  WEALTH  BE- 
TWEEN LAND  OWNERS  ON  THE  ONE  HAND  AND 
CAPITALISTS  AND  LABORERS  ON  THE  OTHER  HAND. 
ALSO  THE  LAW  OF  RENT  AND  ITS  COROLLARY,  THE 
LAW  OF  WAGES. 

A  SIMPLE  illustration  of  the  way  in  which  wealth 
is  naturally  distributed  is  seen  in  the  case  of  a 
tenant  farmer,  who  borrows,  say,  $5,000,  and  opens 
up  a  farm  on  unimproved  land,  not  owned  by  him, 
but  which  he  leases  from  another.  He  uses  this 
money  to  provide  himself  with  buildings,  teams, 
implements,  supplies,  etc.,  these  things  being  in  effect 
borrowed  by  him  from  the  capitalist  who  loans  him 
the  $5,000.  He  might  arrange  to  pay  the  capitalist 
interest,  the  land  owner  rent,  and  the  laborers  wages, 
in  wheat  raised  on  the  place;  but  whether  he  does 
this  or  sells  the  wheat  and  pays  them  in  money,  the 
wealth  produced  on  the  land  is  just  as  clearly  divided 
among  the  factors  of  land,  capital  and  labor,  as  if 
these  payments  were  made  in  kind.  Say  that  he 
raises  2,000  bushels  of  wheat,  which  are  sold  for 
$2,000,  of  which  the  land  owner  gets  $300  as  rent, 
the  capitalist  $300  as  interest,  and  the  employees 
$600  as  wages,  leaving  a  net  gain  of  $800  to  the 
tenant  farmer.  This  gain  of  $800  is  the  result  of 
lihoY  of  the  tenant  farmer.    It  is  the  reward  received 


The  Distribution  of  Wealth  155 

by  the  tenant  farmer  for  his  industry  and  enterprise. 
To  call  any  part  of  it  profit,  or  to  give  to  it  any  other 
name  than  wages,  is  needlessly  to  introduce  a  con- 
fusing distinction.  It  constitutes,  however,  the  wages 
of  the  employer  as  distinguished  from  the  wages  of 
the  employee. 

Before  discussing  the  causes  which  affect  the  divi- 
sion of  the  product  between  employer  and  employee, 
it  is  first  in  order  to  consider  those  which  affect  the 
amount  to  be  divided;  for  the  portion  to  be  thus 
divided  depends  on  what  is  left  after  land  has 
received  rent  and  after  capital  has  received  interest. 
In  the  discussion  which  follows,  therefore,  rent  will 
be  separated  from  the  total  product,  interest  will  be 
deducted  from  what  is  left,  and  the  remainder  as 
wages  will  be  divided  between  employer  and  em- 
ployee. In  this  way,  we  can  ascertain  the  causes 
which  affect  the  ratio  of  the  division  among  land 
owners,  capitalists,  employers  and  employees, 
respectively.  In  the  illustration  given,  wheat,  the 
product  of  the  factors  of  land,  capital  and  labor,  is 
sold  for  $2,000 ;  in  the  division  of  this  product,  land 
gets  $300,  capital  $300,  and  labor  gets  the  remain- 
der. Thus  labor  receives  $1,400,  of  M'hich  the  em- 
ployer gets  $800  and  the  employees  $600. 

The  product  of  every  wealth-producing  enterprise 
can  be  thus  divided  into  as  many  parts  as  there  are 
factors  entering  into  its  production  ;  and  since  wealth 
is  brought  forth  by  a  combination  of  land,  capital 
and  labor,  the  product  is  naturally  divided  in  the 
first  instance  into  three  parts  only,  one  representing 
rent,  another  interest,  and  the  other  wages.  Had 
the  tenant,  in  the  case  cited,  owned  the  capital  which 
he  used,  and  thus  combined  in  himself  the  function  - 


156  The  Problem  of  the  Unemployed 

of  a  capitalist  as  well  as  a  laborer;  or  owning  the 
land  also,  had  he  combined  in  himself  the  functions 
of  landlord,  capitalist  and  laborer,  the  portions  of 
his  income  attributable  respectively  to  rent,  interest 
and  wages  would  have  been  the  same,  and  could  have 
been  just  as  easily  ascertained.  This  has  been  ex- 
plained in  a  previous  chapter. 

While  the  division  of  the  product  among  the  fac- 
tors of  land,  capital  and  labor  is  most  easily  seen  in 
the  case  of  labor  applied  directly  to  the  soil,  it  can 
nevertheless  be  observed  in  all  wealth-producing 
enterprises.  Whenever  the  raw  material  of  one  stage 
is  changed  into  the  finished  product  of  the  next,  the 
additional  wealth  thus  produced  is  in  effect  divided 
among  land  owners,  capitalists  and  laborers.  The 
fact  that  in  many  instances  there  is  a  remaining  por- 
tion appropriated  under  exceptions  to  the  general 
rule,  for  which  no  consideration  in  the  performance 
of  service,  or  in  the  furnishing  of  land  or  capital,  is 
given,  such  as  exceptions  arising  from  special  priv- 
ileges and  combinations  in  restraint  of  trade  and 
otherwise,  has  already  been  alluded  to.  While  it 
lessens  the  amount  to  be  divided  among  the  factors 
of  production,  it  does  not  affect  the  ratio  of  the 
division. 

Take  the  stage  embracing  the  period  from  the  time 
when  the  tenant  farmer  places  the  2,000  bushels  of 
wheat  in  the  warehouse  of  the  nearest  railway  sta- 
tion until  it  is  delivered  from  an  elevator  in  a  distant 
city  to  the  flouring  mill.  During  this  period,  valuable 
land  has  been  furnished  for  the  storage  and  trans- 
portation of  the  wheat ;  land  has  also  been  furnished 
as  sites  for  the  buildings  in  which  merchants  and 
brokers  have  expended  mental  effort  in  directing  its 


The  Distribution  of  Wealth  157 

transportation  and  in  effecting  its  exchange  for  other 
commodities;  land  has  also  been  furnished  for  the 
houses  in  which  the  laborers  lived  who  had  handled 
it,  and  without  which  the  wheat  could  not  have  been 
moved;  capital  has  also  been  used  in  the  form  of 
buildings  and  railway  improvements  and  other  appli- 
ances, including  the  houses,  and  labor,  both  physical 
and  mental,  has  been  employed  in  bringing  the  wheat 
to  the  flouring  mill,  where  it  is  worth,  independently 
of  any  fluctuation  in  price,  say,  fifteen  cents  a  bushel 
more  than  when  it  left  the  hands  of  the  farmer.  In 
other  words,  wealth,  to  the  extent  of  fifteen  cents  per 
bushel,  has  been  as  effectually  produced  by  labor, 
and  by  the  use  of  land  and  capital,  as  in  the  produc- 
tion of  the  original  wheat  itself,  and  added  to  its 
original  value.  This  additional  wealth  of  fifteen 
cents  per  bushel  is  as  surely  divided  among  the  fac- 
tors of  land,  capital  and  labor,  each  of  which  has 
contributed  in  a  measure  to  its  production,  as  was 
the  original  wheat  in  effect  divided  among  the  same 
factors  when  it  was  sold  by  the  tenant  farmer  for 
$2,000.  The  fact  that  money,  instead  of  wheat,  is 
paid  for  the  labor  and  for  the  use  of  the  land  and 
the  use  of  the  capital,  and  that  hundreds  of  thou- 
sands of  bushels  of  wheat  are  handled  in  connection 
with  the  2,000  bushels,  is  of  course  immaterial ;  and 
so,  also,  is  the  fact  that  v/e  cannot  tell  just  how 
many  cents  of  this  additional  wealth  per  bushel  goes 
respectively  to  land  owners,  capitalists  and  laborers. 
It  is  the  fact  alone  that  the  division  is  made  which 
is  material ;  for  it  is  evident,  for  instance,  that  a 
cause  which  would  decrease  rent  might,  under  cer- 
tain conditions,  increase  the  portions  going  to  cap- 
ital and  labor ;  and  a  cause  which  would  increase  the 


158  The  Problem  of  the  Unemployed 

independence  of  employees  might,  under  certain 
conditions,  decrease  the  employers'  portion  of  the 
share  received  by  labor. 

In  the  study  of  the  causes  which  thus  affect  the 
portions  received,  respectively,  by  the  various  fac- 
tors of  production,  is  found,  as  stated  in  Chapter  V, 
the  key  to  the  solution  of  the  economic  problem. 

Land  is  used  by  capital  and  labor,  as  shov^^n  above, 
in  producing  the  finished  product  as  wqW  as  the  raw 
material.  When  the  farmer  sold  the  wheat,  it  was 
raw  material,  and  wealth  was  constantly  produced 
thereafter  and  annexed  to  it  on  its  journey  upon  and 
in  connection  with  land  occupied  by  office  buildings, 
railroads,  elevators,  flouring  mills,  warehouses  and 
bakeries,  until  the  wheat  was  placed  on  the  table  of 
the  consumer  in  the  form  of  bread,  in  which  form  it 
was  worth,  say,  $3.00  a  bushel.  The  owners  of  this 
land  received  pay  for  its  use,  and  this  pay  increased 
the  cost  of  the  bread  just  as  did  the  $300  rent  paid 
to  the  owner  of  the  land  on  which  the  wheat  was 
grown. 

This  history  of  a  loaf  of  bread  does  not  differ  in 
any  material  respect  from  the  history  of  any  other 
article  of  wealth.  Take  the  coat,  the  making  of 
which  begins  with  wool  produced  by  farmers ;  or  the 
gown,  beginning  with  cotton  which  farmers  raise;' 
take  the  watch  spring,  beginning  with  the  ore  which 
the  miner  brings  to  the  surface  of  the  earth ;  or  take 
the  chair,  beginning  with  the  timber  which  the  lum- 
berman fells.  In  these,  and  in  every  other  like  case, 
Wealth  is  produced  and  added  to  the  raw  material 
by  means  of  appliances  which  come  within  the  defi- 
nition of  capital,  and  which  rest  on  land,  and  which 
are  operated  by  laborers  using  lands,  just  as  from 


The  Distribution  of  Wealth  159 

wheat  bread  is  made  and  finally  placed  on  the  table 
of  consumers,  and  in  every  instance  this  additional 
wealth  is  produced  by  the  factors  of  land,  capital 
and  labor. 

The  amount  of  wealth  of  the  character  referred  to 
above,  produced  on  non-agricultural  land  and  im- 
parted to  the  raw  material  in  its  conversion  into 
things  useful  to  man,  and  in  delivering  them  to 
consumers,  greatly  exceeds  the  amount  of  wealth 
embodied  in  the  raw  material  itself  as  it  comes  from 
the  hands  of  farmers  and  miners.  Thus,  a  bushel  of 
wheat,  for  which  the  farmer  receives,  say,  a  dollar, 
is  made  into  sixty  loaves  of  bread,  costing  three 
dollars — threefold  increase.  Meat,  for  which  the 
farmer  gets  five  cents  a  pound,  is  worth  perhaps 
three  times  that  sum  on  the  table  of  the  consumer. 
A  few  pounds  of  wool,  for  which  the  fVrmer  is  paid 
but  a  dollar  or  less,  may  be  worth  from  five  to 
twenty  dollars,  or  more,  in  thp  coat  worn  by  the 
mechanic,  and  the  cotton  wh:ch  the  farmer  raises 
is  often  increased  tenfold  anfi  more  in  value  when 
it  is  ready  to  be  consumed  as  clothing.  This  is  also 
true  of  iron  ore  when  it  has  been  worked  into  things 
ready  for  consumption.  And  so  as  to  numberless 
other  articles,  the  valuii  of  the  finished  product 
vastly  exceeds  that  of  the  original  raw  material. 

If  we  reflect  for  a  moment  on  the  thousand  and 
one  things  consumed  and  in  the  process  of  consump- 
tion by  us  in  our  daily  lives,  and  compare  the  value 
of  them  with  the  value  of  the  original  material  from 
which  they  have  been  made,  we  can  hardly  fail  to 
reach  the  conclusion  that  the  aggregate  amount  of 
wealth  brought  into  being  by  artisans,  merchants 
and  others  of  like  class,  and  annexed  to  the  raw 


160  The  Problem  of  the  Unemployed 

material  furnished  by  farmers,  miners,  lumbermen, 
hunters  and  fishermen,  whose  labor  is  applied  direct- 
ly to  land,  is  often  in  the  aggregate  many  times 
greater  than  that  of  the  original  articles  when  first 
produced.  In  this  connection,  it  must  ever  be  borne 
in  mind,  as  already  shown,  that  the  labor  of  mer- 
chants and  brokers  produces  and  annexes  wealth  to 
commodities  as  certainly  as  that  of  mechanics  and 
manufacturers. 

From  all  this  wealth  the  toll  taken  in  the  form  of 
rent  by  those  on  whose  land  it  is  produced,  and 
annexed  to  the  original  product,  very  largely  ex- 
ceeds the  rent  of  agricultural  lands.  This  being  true, 
then  the  aggregate  value  of  non-agricultural  lands 
ought  to  exceed  the  aggregate  value  of  lands  in  cul- 
tivation in  approximately  the  same  ratio.  Such  is, 
in  fact,  the  case,  and  if  the  forces  of  government 
were  so  applied  as  to  insure  the  natural  order  in 
the  use  as  well  as  in  the  appropriation  of  land,  prob- 
ably two-thirds  of  the  lands  now  in  cultivation 
would  have  no  economic  rental  value  whatever.  As 
it  is  at  present,  probably  four-fifths  of  the  rent 
received  by  individuals  is  for  the  use  of  lands  other 
than  those  in  cultivation.  The  aggregate  burden  thus 
borne  by  capital  and  labor  in  this  country  now 
exceeds  thousands  of  millions  of  dollars  annually.* 
That  is  to  say,  in  Free  America,  capital  and  labor 
are  now,  in  effect,  paying  several  thousand  million 
dollars  every  year,  not  to  the  government  in  lieu  of 
every  species  of  taxation,  but  to  individuals,  as 
tribute  money  for  the  bare  privilege  of  employment ! 

One  reason  for  the  comparatively  slight  import- 
ance attached  by  anarchists,  socialists  and  many  pro- 

*See  "Natural  Taxation,"  by  Thomas  G.  Shearman. 


The  Distribution  of  Wealth  161 

fessors  of  political  economy  to  the  influence  of  the 
factor  of  rent  in  the  distribution  of  wealth  is  the 
disposition  to  associate  rent  almost  exclusively  with 
lands  devoted  to  agriculture.  In  point  of  fact,  under 
natural  conditions  agricultural  lands  would  hardly 
yield  ten  per  cent  of  the  real  economic  rent  of  a 
country  like  the  United  States,  while  under  actual 
conditions  they  yield  less  than  twenty  per  cent.  An- 
other reason  for  ignoring  the  subject  is  the  fear  of 
encouraging  unjustifiable  legislation  affecting  the 
rights  of  those  who  are  now  permitted  to  appro- 
priate rent  for  private  use.  Progress  is  often  re- 
tarded by  the  notion  that  truth  is  sometimes  more 
dangerous  than  error.  But  be  this  as  it  may,  the 
faithful  student  will  find  in  the  law  of  rent  the  law 
of  wages.  And  he  will  also  find  in  it  the  explanation 
of  the  social  paradox  of  increasing  poverty  in  the 
midst  of  increasing  wealth.  For  it  can  be  seen 
almost  at  a  glance  that  if  the  effect  in  the  long  run 
of  inventions  and  material  progress  is  to  add  to  the 
value  of  land  only,  and  thus  increase  rent  without 
iwcreasing  wages,  then  in  this  fact  is  the  explana- 
tion of  the  failure  of  wages  to  rise  in  proportion  to 
the  increased  effectiveness  of  labor ;  while  the  obsta- 
cles to  employment  pointed  out  in  Chapter  VIII 
afford  sufficient  reason  for  men  who  are  willing  to 
work  being  so  often  unable  to  find  work. 

The  economic  rent  of  land  is  the  net  income  which 
can  be  derived  from  its  use  in  a  wealth-producing 
enterprise  adapted  to  its  location,  after  capital  has 
been  paid  current  interest,  and  after  labor  has  been 
paid  current  wages.  Rent  when  capitalized,  or  the 
economic  value  of  land,  is  the  equivalent  of  a  sum 
of  money  which,   if  invested  at  current  rates  of 


162  The  Problem  of  the  Unemployed 

interest,  would  produce  an  income  equal  to  the 
economic  rent  of  the  land.  Thus,  if  the  economic 
rent  is  six  hundred  dollars  and  interest  is  six  per 
cent,  the  economic  value  of  the  land  will  be  ten  thou- 
sand dollars.  As  already  pointed  out,  however,  the 
price  at  which  land  is  sold  generally  exceeds  its 
economic  value,  since  the  prospect  of  an  advance  in 
value  is  usually  discounted  and  added  to  the  economic 
value. 

The  rent  of  land  without  regard  to  improvements 
approximates  the  excess  of  wealth  which  it  will 
yield  above  the  amount  which  can  be  produced  with 
the  same  expenditure  of  effort  on  the  least  product- 
ive land  in  use,  and  this  excess  alone  increases  nat- 
urally as  the  efficiency  of  the  laborer  is  increased  by 
the  aid  of  labor-saving  appliances.  In  accordance 
with  the  law  of  rent,  as  stated  above,  rent,  and  rent 
alone,  or  the  value  of  land,  is  directly  increased  in 
the  long  run  by  improvements  in  labor-saving  ma- 
chinery, growth  of  population  and  material  progress 
generally.  Further  illustrations  of  this,  the  most 
important  truth  in  political  economy,  will  not  be 
amiss. 

Suppose  there  are  three  tracts  of  land  situated, 
respectively,  one  mile,  ten  miles  and  thirty  miles 
from  market,  and  that  the  same  amount  of  capital 
and  labor  is  applied  to  each  tract,  viz :  five  hundred 
dollars  of  capital  and  the  equivalent  of  one  hundred 
days  of  common  labor.  Other  things  being  equal, 
most  wealth  will  be  produced  on  the  first  tract  near- 
est the  market,  less  on  the  second,  and  least  on  the 
third,  because  of  the  labor  involved  in  hauling  the 
crops  to  market.  Suppose  the  amount  of  wealth 
produced  on  the  first  tract  is  three  hundred  dollars, 


The  Distribution  of  Wealth  163 

on  the  second  tract  two  hundred  dollars,  and  on  the 
third  one  hundred  dollars.  Of  course,  the  difference 
in  the  value  or  desirability  of  the  tracts  of  land, 
respectively,  might  as  well  arise  from  difference  in 
anything  else  affecting  the  value.  It  is  evident  that 
in  America,  land  on  which  less  than  one  hundred 
dollars  worth  of  wealth  can  be  produced  with  the 
use  of  five  hundred  dollars  of  capital  and  the  appli- 
cation of  one  hundred  days  of  labor,  will  remain,  or 
at  least  ought  to  remain,  uncultivated.  It  will  be 
assumed  in  any  event,  however,  that  the  third  tract 
belongs  to  the  class  of  land  which  is  the  least  pro- 
ductive of  any  in  use.  Applying  the  law  of  rent,  as 
above  quoted,  to  this  land,  and  it  follows  that  the 
third  tract  will  yield  no  economic  rent,  while  the 
second  tract  will  yield  economic  rent  to  the  amount 
of  one  hundred  dollars,  and  the  first  to  the  amount 
of  two  hundred  dollars.  Given  the  prevailing  rate 
of  interest,  and  from  this  data  the  economic  value 
of  each  of  the  respective  tracts  can  be  ascertained. 
Assuming  the  rate  of  interest  to  be  six  per  cent,  and 
it  follows  that  the  third  tract  has  no  economic  value, 
while  the  capitalized  economic  value  of  the  second 
tract  is  $1666,  and  that  of  the  first  is  $3333.  It  will 
be  found  from  observation  that  the  price  ordinarily 
paid  for  land,  irrespective  of  improvements  on  it, 
is  its  economic  value  plus  a  speculative  value  often 
added  in  anticipation  of  a  future  increase  in  real 
value.  The  economic  rent  of  land  which  is  not  de- 
voted to  agricultural  uses  can  be  ascertained  in  the 
same  way. 

Under  the  law  of  rent,  which  is  as  unvarying  in 
its  application  as  the  law  of  gravitation,  the  entire 
advantage  from  location  or  quality  of  land  naturally 


164  The  Problem  of  the  Uneynployed 

goes  to  the  land  owner,  and  none  in  the  final  adjust- 
ment of  the  rent  to  either  the  laborer  or  the  capi- 
talist. A  day's  labor  on  the  first  of  the  three  tracts 
of  land,  with  the  aid  of  five  hundred  dollars  of 
capital,  produces  three  dollars'  worth  of  wealth, 
while  on  the  second  tract  it  produces  only  two  dol- 
lars' worth,  yet  the  wages  paid  employees  for  work 
on  the  first  tract  are  no  higher  than  those  paid  for 
work  on  the  second  tract.  The  economic  value  of 
the  first  tract,  however,  is,  say,  one  hundred  dollars 
per  acre,  vv^hile  that  of  the  second  tract  is  perhaps 
but  twenty  dollars  per  acre.  When  tracts  of  land 
thus  situated,  respectively,  are  rented,  the  difference 
in  the  rent  collected  from  each  is  usually  such  that 
the  tenant  on  one  tract  can  make  no  more  than  the 
tenant  on  the  other ;  in  the  long  run,  this  is  always 
the  case. 

Suppose  that  one  day's  labor  applied  to  land  on 
which  a  certain  coal  bed  is  located  will  produce  on 
an  average  fifteen  dollars'  worth  of  wealth  in  the 
form  of  coal;  j^et,  in  estimating  the  value  of  this 
land,  wages  at  current  rates  only  will  be  considered ; 
the  same  is  the  case  as  to  the  rate  of  interest  on  the 
capital  necessary  for  sinking  the  shafts  and  operat- 
ing the  mine.  In  fixing  the  price  of  the  land  without 
reference  to  improvements,  at,  say,  a  thousand  dol- 
lars per  acre,  the  estimate  as  to  the  share  of  the 
product  which  labor  must  have  will  be  no  greater 
than  would  be  the  case  if  labor  could  only  produce 
three  instead  of  fifteen  dollars'  worth  of  coal  in  a 
day;  nor  will  interest  on  the  capital  employed  be 
estimated  at  any  higher  rate  on  this  account.  Sup- 
pose the  coal  bed,  when  the  employer  bought  it  at 
the  rate  of  a  thousand  dollars  an  acre,  was  in  a 


The  Distrihution  of  Wealth  165 

lawless  community,  abounding-  in  liquor  shops,  with 
few  schools  and  no  refining  social  influences,  and 
where  life  was  unsafe,  and  riots  and  labor  troubles 
were  common ;  and  that,  within  a  few  years,  a  change 
for  the  better  ensued,  and  the  people  became  intelli- 
gent and  law-abiding.  It  would  then  be  safer  and 
more  desirable  to  invest  capital  in  the  employment 
of  labor  in  this  community;  there  would  therefore 
be  a  greater  demand  for  coal  beds  there  than  other- 
wise would  be  the  case,  and  this  would  increase  the 
price  demanded  for  the  land  containing  them ;  hence, 
while  neither  interest  nor  wages  would  rise  on  this 
account,  land  values  would.  Labor  as  well  as  capital 
would  be  attracted  to  such  a  community,  but  land 
owners  only  in  the  end  would  profit  by  the  material 
advantage  directly  resulting  from  the  improvements 
in  the  intelligence  and  morality  of  the  laborers. 

Again,  suppose  that,  ov/ing  to  inventions  after- 
wards discovered,  twice  as  much  coal  with  the  same 
labor  could  be  mined  as  when  the  unused  coal  beds 
were  bought  at  the  rate  of  a  thousand  dollars  an 
acre.  In  estimating  what  would  be  paid  for  the  land 
then,  however,  no  more  than  current  interest  and 
current  wages  would  be  considered.  The  difference 
resulting  from  improvements  in  methods  of  pro- 
ducing coal,  which  would  increase  the  output  without 
increase  of  labor,  would  add  to  the  value  of  the  land, 
and  an  employer  would  then  have  to  pay,  say,  two 
thousand  dollars  an  acre  instead  of  a  thousand,  if 
the  demand  for  coal  remained  the  same.  If  the 
employer  were  fortunate  enough  to  have  bought  this 
land  before  the  improvement  in  social  conditions  or 
in  the  machinery  occurred,  he  would  not  on  this 
account  pay  more  as  wages  or  receive  more  as  inter- 


166  The  Problem  of  the  Unemployed 

est.  As  an  employer,  he  would  continue  to  pay 
current  wages,  and  as  a  capitalist  he  would  continue 
to  receive  current  interest;  but  as  a  landlord,  he 
would  demand  and  receive  all  the  benefit  of  the  in- 
creased amount  of  wealth  produced  from  the  causes 
mentioned,  unless  prompted  to  do  otherwise  by  pure 
benevolence  or  the  fear  of  a  strike.  Such  increase 
of  rent  would  be  shown  in  the  increased  net  receipts 
of  the  enterprise.  Thus,  if  before  the  improved 
machinery  was  introduced  the  gross  receipts  were 
$10,000,  and  after  its  introduction  $15,000,  with  no 
increase  of  expenses,  $5,000  would  represent  the 
additional  rent  collected  by  virtue  of  the  labor- 
saving  appliance  and  improvements  in  social  con- 
ditions. 

The  meaning  of  the  law  of  rent  and  the  correct- 
ness of  the  definition  given  is  readily  seen  when  the 
application  is  made  to  farming  and  mining  lands; 
reflection,  however,  will  show  that  it  applies  with 
equal  force  and  constancy  to  urban  and  all  lands 
generally.  The  advantage  of  location  in  the  city  as 
well  as  in  the  country  always  in  the  long  run  goes 
to  the  owner  of  the  site  on  which  the  business  is 
located,  rather  than  to  the  man  who  builds  the  busi- 
ness up;  and  while,  on  an  average,  misfortune  and 
failure  more  often  perhaps  than  otherwise  overtake 
the  latter  in  the  end,  nothing  interferes  in  thriving 
communities  with  the  steady  increase  of  rent  year 
by  year,  or  at  least  decade  by  decade. 

What  has  been  said  in  regard  to  rent  would  be 
proved  by  experience  in  every  instance  if  natural 
conditions  alone  controlled.  If  special  privileges  and 
the  combinations  in  restraint  of  trado  which  usually 
originate  in  them  were  abolished,  and  if  free  compe- 


The  Distribution  of  Wealth  167 

tition  and  the  law  of  supply  and  demand  were 
allowed  full  play,  all  aberrations  and  apparent  excep- 
tions to  the  law  of  rent  would  quickly  disappear. 

It  is  not  claimed,  however,  that  the  immediate 
effect  of  every  labor-saving  appliance,  even  under 
natural  conditions,  would  be  to  enhance  the  value  of 
land  to  such  an  extent  as  to  absorb  the  entire  benefit ; 
ultimate  results  only  are  referred  to.  The  first  effect 
of  such  appliances  in  many,  if  not  all,  instances,  is 
to  increase  the  wages  of  employers  who  use  them  as 
well  as  the  value  of  the  land  on  which  they  are  used. 
The  employer,  sometimes  called  an  entrepeyieur,  or 
enterpriser,  by  orthodox  political  economists,  often 
reaps  a  handsome  reward  for  his  enterprise  in  intro- 
ducing new  inventions ;  but  the  law  of  averages,  and 
the  effect  of  supply  and  demand,  sooner  or  later 
reduce  his  wages  to  the  common  level,  and  in  the 
end  the  land  owner  gets  it  all.  Thus,  in  Southern 
Texas  and  Louisiana,  when  the  improved  methods 
in  the  cultivation  and  harvesting  of  rice,  to  which 
attention  has  been  called,  were  first  introduced, 
small  fortunes  were  rapidly  acquired  by  employers 
while  land  was  only  three  or  four  dollars  an  acre. 
But  in  a  few  years  these  lands  advanced  to  thirty 
dollars  an  acre ;  and  then  the  cultivation  of  rice  was 
no  more  profitable  than  the  cultivation  of  cotton ; 
the  wages  of  rice  raising  employers  fell  accordingly, 
so  that  land  owners  in  the  end  reaped  the  entire 
benefit. 

A  novel  illustration  of  the  fact  that  while  the 
employer  or  the  laborer  may  at  first  profit  from  an 
advantage  suddenly  conferred  upon  some  special 
spot  of  land,  the  owners  themselves  quickly  reap  the 
fruits  of  it,  was  seen  in  recent  years  in  connection 


168  The  Problem  of  the  Unemployed 

with  one  of  the  slums  of  London.  This  particular 
slum  was  so  vile  and  so  conveniently  located  as  to 
attract  sight-seers  in  great  numbers  during  the  year 
of  the  Queen's  Jubilee.  In  consequence  of  this,  alms 
in  extraordinary  amounts  were  distributed  among 
its  wretched  inhabitants.  Dwellers  in  other  slums 
v/ere  thus  attracted  to  this  particular  one,  and  fierce 
competition  arose  for  the  chance  of  sharing  in  this 
golden  harvest.  Since  the  tenements  were  rented  by 
the  week  only,  rents  at  once  advanced,  and  by  the 
end  of  the  season  the  sums  paid  for  the  privilege  of 
living  in  these  miserable  dens  were  fourfold  greater 
than  before,  and  thus  nearly  all  the  gifts  to  tenants 
were  appropriated  by  landlords.  In  the  same  way, 
the  millions  of  dollars  sent  by  Irish  immigrants  in 
this  country  to  relatives  in  Ireland  have  simply 
enabled  the  landlords  of  Ireland  to  demand  and 
receive  higher  rents  than  would  otherwise  have  been 
the  case.  If,  for  instance,  $10,000,000  were  to  be 
systematically  distributed,  year  after  year,  in  char- 
ity among  the  deserving  poor  of  the  slums  of  New 
York,  the  only  effect  of  it,  after  a  short  time,  would 
be  to  increase  to  that  extent  the  rents  of  the  land- 
lords owning  the  slums.  It  would  have  the  effect  of 
increasing  the  demand  for  tenements  in  these  slums, 
and  this  increased  demand  would  increase  rent. 

And  so  it  is  under  all  circumstances,  the  price  of 
any  tract  of  land,  or  the  rent  paid  for  the  use  of  it, 
exclusive  of  the  use  of  the  improvements,  always 
covers  every  advantage  which  it  may  have  over  any 
other  tract,  and  from  such  advantage  neither  cap- 
italists nor  laborers,  as  such,  can  derive  any  perma- 
nent benefit — in  the  end  it  all  goes  to  the  owner  in 


The  Distrihution  of  Wealth  169 

the  additional  price  charged  for  it,  or  for  the  use 
of  it. 

Rent  also  paralyzes  the  hand  of  charity,  and  ren- 
ders futile  all  attempts  to  alleviate  the  condition  of 
the  very  poor  by  means  of  benevolence  only.  Thus 
the  students  of  a  theological  seminary  in  New  York, 
having  had  their  attention  called  to  the  cold  dinners 
eaten  from  proverbial  dinner  pails  by  the  laborers 
on  a  nearby  building,  concluded  to  play  the  part  of 
practical  Christians.  So  they  appeared  on  the  works 
with  hot  coffee  every  noon,  until  the  building  was 
completed,  and  served  it  to  the  men  gratuitously. 
This  act  of  kindness  was  duly  appreciated.  Suppose, 
however,  it  had  been  universally  emulated,  and  that 
all  laborers  working  for  building  contractors  in  the 
same  grade  of  employment  in  Nev/  York  had  been 
gratuitously  served  with  hot  coffee,  or  better  still, 
v/ith  a  hot  dinner,  every  day  by  the  charitable  rich. 
This  would  have  been  equivalent  to,  say,  a  ten  per 
cent  increase  in  wages.  Such  an  unnatural  advance 
of  wages  would  have  attracted  laborers  from  other 
places  and  from  other  lines  of  employment,  and 
competition  among  them  would  have  quickly  reduced 
wages  to  the  former  level.  The  laborer  would  then 
have  been  no  better  off  than  before.  In  fact,  he 
would  be  worse  off,  for  his  personal  dignity  and 
pride  of  character  would  have  been  impaired  by  the 
acceptance  of  the  gratuity.  The  employing  contract- 
ors would  have  profited  by  it  at  first,  however,  since 
it  would  have  enabled  them  to  obtain  the  laborer's 
services  ten  per  cent  cheaper,  just  as,  from  the  same 
cause,  the  Pullman  Car  Company  is  able  to  hire  its 
tip-accepting  porters  at  starvation  wages.  The  char- 
itable dimes  and  quarters  bestowed  upon  the  porters 


170  The  Problem  of  the  Unemployed 

are  pocketed  by  the  Pullman  Company,  because  it  is 
a  monopoly ;  in  the  case  of  the  building  contractors 
in  New  York  the  value  of  charity  dinners  would,  in 
the  long  run,  be  pocketed  by  land  owners,  since  com- 
peting contractors  would  be  compelled  to  erect  build- 
ings somewhat  cheaper  on  account  of  the  reduction 
in  wages  resulting  from  this  benevolence. 

When  the  law  of  rent  is  clearly  understood,  the 
reason  for  the  failure  of  improvements  in  labor- 
saving  processes  to  increase  wages  is  easily  seen. 
Thus,  to  recapitulate:  Under  natural  conditions, 
wealth  is  divided  wholly  among  the  factors  entering 
into  its  production,  a  portion  of  it  going  to  labor  as 
wages,  another  portion  to  capital  as  interest,  and  the 
remainder  to  land  as  rent.  Labor-saving  processes, 
and  material  progress  generally,  naturally  enhance 
the  value  of  land  and  increase  rent  only;  hence  the 
portion  going  to  land  owners  is  increased  without 
increase  of  the  portion  going  to  laborers  and  capi- 
talists. It  necessarily  follows  that  labor-saving  in- 
ventions do  not  increase  wages,  simply  because  the 
natural  effect  of  them,  in  the  end,  is  to  increase  land 
values  alone.  Since  all  increase  naturally  goes  to 
land  as  increase  in  rent,  none  of  it  can  naturally  go 
to  labor  as  increase  in  wages,  or  to  capital  as  increase 
in  interest.  If  land  owners  get  all  of  it,  capitalists 
and  laborers  can  get  none  of  it.  What  is  more  simple 
than  this  ?  Yet  it  is  the  fundamental  truth  on  M^hich 
the  science  of  political  economy  is  based.  It  is  fool- 
ish to  ignore  it,  or  deny  it,  or  shrink  from  the  conse- 
quences which  necessarily  follow.  When  all,  or 
nearly  all,  the  profit  of  anything  goes  to  one  man, 
or  one  class  of  men,  none,  or  but  little  of  it,  can  go 
to  another  man,  or  another  class  of  men.     If,  under 


The  Distribution  of  Wealth  171 

natural  conditions,  all  the  increase  of  the  product 
resulting  from  improvements  in  machinery  ulti- 
mately goes  to  owners  of  ground  on  which  machinery 
rests,  then,  under  such  conditions,  none  of  it  can  go 
to  laborers  for  operating  im.proved  machines,  or  to 
capitalists  for  furnishing  the  use  of  them. 

As  already  stated,  the  law  of  rent  is  also  the  law  of 
wages,  the  latter  being  the  corollary  of  the  former. 
Since,  under  the  law  of  rent,  the  owner  of  any  tract 
of  land  finally  gets  all  produced  upon  it  in  excess 
of  what  can  be  produced  vAth  the  same  expenditure 
of  effort  on  the  least  productive  land  in  use,  it  fol- 
lows that  labor  on  any  land  can  only  get  as  wages 
the  equivalent  of  what  it  could  produce  on  such  least 
productive  land.  In  the  sense  used,  however,  labor 
includes  capital,  and  wages  includes  interest.  This 
is  the  case  because  capital  is  stored  up  labor,  and 
interest  is  wages  paid  for  the  use  of  such  labor.  See 
supra,  pages  39-40.  In  the  last  analysis,  therefore, 
wealth  is  really  the  product  of  but  two  factors, 
namely,  land  and  labor;  and  it  is  divided  between 
them  as  rent  and  wages.  Thus,  the  $5,000  worth  of 
capital  represented  by  the  tools,  teams,  buildings, 
etc.,  used  by  the  tenant  farmer  was  the  product  of 
labor,  and  its  use  was  the  application  to  land  of 
stored-up  labor.  The  interest  of  $300  a  year,  paid 
for  the  use  of  this  capital,  was  wages  paid  for  labor 
or  eflfort,  as  much  so  as  the  money  received  by  the 
hired  hands;  hence  "effort,"  when  applied  to  land, 
has  reference  to  the  labor  stored  up  in  the  capital 
used  upon  it,  as  well  as  to  the  labor  of  those  by 
means  of  whose  brains  and  hands  the  capital  is 
applied.  It  follows,  therefore,  that  although  a  cer- 
tain amount  of  capital  and  toil  may  be  applied  to 


172  The  Problem  of  the  Unemployed 

one  tract  of  land,  and  less  capital  and  more  toil  to 
another,  or  more  capital  and  less  toil  to  still  another, 
the  amount  of  effort  applied  to  each,  respectively, 
is  not  necessarily  different  on  this  account. 

Bearing  in  mind  the  meaning  of  "effort"  as  used 
here,  it  is  easy  to  apply  the  law  of  wages  to  the  three 
tracts  of  land  situated,  respectively,  one  mile,  ten 
miles  and  thirty  miles  from  market.  Let  it  be 
assumed  that  this  land  was  subject  to  conditions 
largely  prevailing  in  the  West  thirty  or  forty  years 
ago,  and  that  the  tract  thirty  miles  from  market 
was  free  land.  On  the  last  mentioned  tract,  the 
equivalent  of  one  hundred  days  of  common  toil  and 
the  use  of  five  hundred  dollars  of  capital  produced 
v/ealth  of  the  value  of  $100.  On  this  free  land, 
then,  a  certain  amount  of  "effort"  produced  one 
hundred  dollars'  worth  of  wealth,  and  the  entire 
product  went  to  labor  as  wages,  and  none  went  to 
land  as  rent.  But,  as  shown  in  the  illustration,  while 
the  same  amount  of  effort  produced  two  or  three 
times  as  much  wealth  on  lands  nearer  the  market, 
no  more  of  the  product  went  to  capital  as  interest  or 
to  labor  as  wages,  because  all  the  excess  went  to 
land  as  rent.  Hence  the  law  of  wages  to  the  effect 
that  labor  (meaning  effort)  on  any  land  receives  as. 
wages  only  the  equivalent  of  what  it  can  obtain  on 
free  land,  or  the  least  productive  land  in  use. 

The  law  of  wages,  as  thus  announced  and  ex- 
plained, states  the  principle  which  regulates  wages, 
rather  than  a  rule  governing  in  all  cases  with  math- 
ematical accuracy.  For  practical  purposes,  it  simply 
means  that  the  greater  the  reward  of  effort,  i.  e.,  toil 
combined  with  capital,  on  available  free  land,  or  on 
the  least  productive  land  in  use,  the  greater  will  be 


The  Distribution  of  Wealth  173 

its  reward  on  all  land  and  in  all  kinds  of  wealth- 
producing  employment.  Or,  to  put  it  differently, 
wages  on  free  land,  or  the  least  productive  land  in 
use,  largely  if  not  wholly  regulates  wages  of  all  kinds 
on  all  lands. 

That  this  is  true  is  abundantly  proven  by  experi- 
ence and  observation.  It  is  not  a  mere  theory,  but 
an  indisputable  fact.  Many  of  the  illustrations 
already  given  bear  it  out,  and  others  of  the  same 
kind  could  be  presented  without  limit.  A  striking 
example  of  it  was  seen  in  California  in  the  prosper- 
ous days  of  placer  mining.  A  man,  then,  with  per- 
haps no  more  than  one  or  two  hundred  dollars  of 
stored-up  labor  (capital),  represented  by  his  burro 
and  the  provisions  and  rude  tools  which  it  carried, 
went  into  the  wilderness,  staked  off  his  claim,  applied 
his  own  toil  and  capital  to  free  land,  and  produced 
on  an  average  $16  worth  of  gold  per  day.  Here, 
"effort,"  represented  by  $200  worth  of  capital  and 
one  day's  toil,  produced  on  free  land  $16  a  day,  all  of 
which  the  laborer  retained,  none  of  it  going  to  a 
landlord.  So  long  as  the  reward  for  this  amount  of 
effort  averaged  $16  per  day  on  free  land,  it  is  evident 
that  the  same  amount  of  effort  would  not  be  applied 
for  a  less  reward  approximately  on  any  nearby  land. 
Some  men  with  an  equal  amount  of  capital  would 
perhaps  prefer  to  work  in  town  for  a  reward  of  $10 
per  day,  rather  than  put  forth  the  additional  effort 
necessary  to  overcome  the  hardships  of  the  wilder- 
ness ;  but  the  fact  that  the  wages  of  Effort  were 
enormous  when  applied  to  free  lands  would  make 
them  enormous  when  applied  to  other  lands.  With 
unlimited  free  land  at  hand,  landlords  could  not,  by 


174  The  Problem  of  the  Unemployed 

advancing  rents,  compel  Effort  to  accept  less  on  their 
land  than  could  be  made  on  free  land. 

While  the  placer  miner  averaged  $16  a  day,  the 
wages  of  common  laborers  in  California  were  $5  a 
day  and  upwards,  and  ordinary  mechanics  earned 
from  $10  to  $20  a  day.  Suppose  the  returns  from 
placer  mining  had  risen  from  $16  to  $32  per  day;  it 
is  evident  that  the  scale  of  wages  on  all  nearby  lands 
would  have  quickly  doubled.  Or  suppose  the  returns 
had  fallen  to  $8  per  day ;  it  is  equally  apparent  that 
wages  generally  would  have  dropped  accordingly. 
Such  rise  or  fall  in  wages  would  have  been  in  accord- 
ance with  the  law  of  wages,  to  the  effect  that  the 
greater  the  reward  of  effort  on  available  free  land, 
the  greater  will  be  its  reward  on  all  land.  In  fact, 
this  actually  occurred  in  California.  As  the  placer 
mines  became  exhausted  and  the  average  earnings 
of  Effort  on  free  land  fell,  the  reward  of  effort  or 
wages  generally  on  all  lands  also  fell. 

In  the  United  States,  for  many  years,  available 
free  lands  were  abundant.  A  man  with,  say,  a  thou- 
sand dollars  or  even  less,  could  settle  on  a  quarter 
section  of  such  land  and  make  a  bountiful  living  for 
himself  and  family,  none  of  the  wealth  produced  by 
him  being  given  up  to  any  landlord.  It  would  be- 
absurd  to  suppose  that  with  such  openings  for  the 
employment  of  capital  and  labor,  a  farmer  would  be 
content  to  rent  land  or  buy  it  from  another,  unless 
he  could  make  as  much  upon  his  entire  investment 
as  upon  free  land.  Hence,  the  owners  of  private 
land  were  forced  to  sell  or  rent  in  competition  with 
free  land,  and  the  price  demanded  for  privately 
owned  land,  or  for  t^B  use  of  it,  was  always  neces- 
sarily low  enough  to  enable  Effort  to  make  approxi- 


The  Distribution  of  Wealth  175 

mately  as  much  upon  such  land  as  upon  nearby  free 
land.  Wages  generally,  of  both  employer  and  em- 
ployee, including  the  rewards  of  effort  of  every  kind, 
were,  therefore,  higher  for  this  reason  in  the  United 
States  than  in  the  older  countries  of  Europe  where 
there  were  no  free  lands. 

The  application  of  the  law  of  wages  in  communi- 
ties where  there  are  no  available  free  lands  is  as 
easily  made.  Thus,  suppose  our  three  tracts  of  land 
were  in  England,  and  that  the  equivalent  of  the  one 
whose  location  is  thirty  miles  from  the  market, 
instead  of  being  free  land,  had  a  rental  value  of  $25. 
The  net  reward  of  effort  on  this,  the  least  productive 
land  in  use,  would  thus  be  $75  instead  of  $100.  But 
Effort  could  get  no  greater  reward  on  the  other  two 
tracts,  since  all  produced  on  either  of  them,  in  excess 
of  $75,  would  go  to  land  as  rent.  If  for  any  reason 
the  net  reward  of  Effort  on  the  least  productive  tract 
were  doubled,  it  would  be  doubled  on  the  other  tracts 
also,  and  wages  on  all  lands  would  rise  accordingly, 
just  as  from  the  same  cause  wages  rose  in  California 
in  the  early  days  of  placer  mining. 

But  why  is  it  that  rent  free  land  is  not  to  be  found 
in  England?  It  is  not  because  of  any  real  scarcity 
of  land,  since,  as  has  been  shown,  there  is  an  abund- 
ance of  unused  or  but  partially  used  land  in  that 
country.  It  is  because  the  forces  of  government 
there,  as  everywhere,  are  so  applied  as  to  press  the 
margin  of  free  land  into  remote  wildernesses  so  far 
from  centers  of  population  that  the  rewards  of  Effort 
upon  it  are  seldom  more  than  sufficient  for  a  bare 
subsistence.  Labor  in  England  and  on  the  Conti- 
nent is  farther  from  free  land  than  labor  in  America, 
and  for  this  reason  the  workers  of  Europe  are  com- 


176  The  Problem  of  the  Unemployed 

pelled  to  submit  to  a  lower  standard  of  living,  espe- 
cially as  regards  unorganized  labor.  Effort,  there- 
fore, accepts  $75  in  Europe  when  it  would  insist  on 
having  not  less  than  $100  in  America.  The  fact, 
however,  that  there  are  other  countries  in  which  the 
rewards  of  labor  on  the  least  productive  land  in  use 
are  greater  than  in  Europe,  prevents  the  standard 
of  living  in  Europe  sinking  to  still  lower  levels,  since 
emigrants  seek  such  countries.  Thus  it  is  that  free 
lands  and  cheap  lands  elsewhere  to  some  extent 
compete  with  the  dear  land  of  Europe,  to  the  benefit 
of  the  laborers  of  Europe  who  do  not  emigrate, 
thereby  lessening  competition  among  laborers  there. 
In  the  United  States  and  in  some  of  the  English 
speaking  colonies  of  Great  Britain,  land  is  rented 
and  sold  in  competition  with  free  land  and  immiense 
quantities  of  low  priced  unused  lands;  hence  land 
owners  in  these  countries  are  unable  to  appropriate 
so  great  a  percentage  of  the  product  as  the  land 
owners  of  Europe ;  and  here,  again,  the  law  of  wages 
is  proven  by  experience  as  well  as  theory,  for  wages 
are  in  fact  higher  in  the  United  States  and  in  the 
colonies  referred  to  than  in  the  countries  of  Europe. 
Suppose  an  island,  as  large  as  Europe,  and  with  a 
soil  equally  fertile,  were  suddenly  to  appear  in  the 
Atlantic  Ocean;  also  that  taxes  on  this  island  were 
so  adjusted  that  no  land  could  be  profitably  withheld 
from  the  use  to  which  it  was  approximately  best 
adapted,  and  that  hence  unused  land  would  continue 
to  remain  free  land  until  put  into  use.  Can  one 
doubt  that  wages  all  over  Europe  would  at  once 
advance  enormously,  provided  laborers  and  small 
capitalists  were  free  to  emigrate  to  this  island? 
Land  in  Europe  would  then  have  to  be  rented  or  sold 


The  Distribution  of  Wealth  177 

in  competition  with  easily  available  free  land,  and 
hence  the  land  owner's  percentage  of  the  product 
would  be  decreased  and  Effort's  percentage  of  it 
increased. 

The  opening  up  of  cheap  if  not  free  lands  in 
Siberia  was  having  precisely  this  effect  on  the  wages 
of  laborers  in  Russia,  when  the  government  of  that 
country  for  this  very  reason  put  a  stop  to  it  in  1900. 
In  that  year  it  was  decreed  that  peasants  should  only 
be  permitted  to  purchase  30  acres  of  government 
land  to  the  family  in  Siberia,  while  members  of  the 
nobility  were  allowed  to  purchase  6,000  acres  apiece, 
at  50  cents  per  acre.  The  plan  recommended  by 
Edward  Gibbons  Wakefield,  nearly  a  hundred  years 
ago,  for  producing  "a  salutary  scarcity  of  employ- 
ment," was  thus  frankly  and  brutally  adopted  by  the 
autocracy  of  Russia. 

Since  bringing  available  free  land  into  competition 
with  privately  owned  land  must  result  in  increasing 
the  rewards  of  effort  on  all  lands,  it  follows  that  if 
the  forces  of  government  in  Europe,  for  instance, 
were  so  applied  as  to  accomplish  this  result  with 
respect  to  the  unused  lands  of  Europe,  it  would  have 
the  same  effect  on  wages  as  the  appearance  of  a  new 
continent  of  nearby  free  lands.  This  would  be  so 
because,  as  already  shown,  one-fourth  or  more  of  the 
area  of  Europe  can  be  classed  as  unused  lands,  much 
of  which  would  speedily  become  free  land  if  it  were 
made  unprofitable  to  withhold  land  from  use  entirely, 
or  from  the  use  to  which  it  was  approximately  best 
adapted.  So,  also,  if  the  forces  of  government  were 
so  applied  in  America  that  the  second  of  our  three 
tracts  of  land  referred  to  in  the  illustration — the 
tract  ten  miles  from  market,  on  which  Effort  pro- 


178  The  Problem  of  the  Unemployed 

duced  $2  per  day — were  brought  within  the  class  of 
the  least  productive  lands  in  use,  the  net  rewards  of 
effort  upon  such  lands  would  be  doubled.  If  this 
were  done,  then  most  of  the  agricultural  labor  of  the 
country  would  be  concentrated  upon  lands  not  less 
productive,  and  the  margin  of  free  land  in  the  com- 
munity in  which  these  tracts  were  situated  would 
thus  be  drawn  from  thirty  miles  to  within  ten  miles 
of  the  market.  In  other  words,  the  distances  between 
free  land  and  the  centers  of  population  v/ouid  be 
reduced,  and  hence  the  net  rewards  of  effort  on  free 
land  would  be  increased  and  wages  on  all  lands  and 
in  every  line  of  industry  would  be  advanced  accord- 
ingly. This  increase  would  not  only  be  the  case  as 
to  wages  in  America,  but  if  immigration  ^vere  not 
restricted,  it  would  to  some  extent  increase  wages 
in  other  countries  also.  Hence  the  rule  already 
stated,  that  the  greater  the  rewards  of  labor  on  the 
least  productive  land  in  use,  the  greater  will  be  its 
reward  on  all  lands. 


CHAPTER  XIII. 
THE  DISTRIBUTION  OF  WEALTH— CONTINUED. 

CAUSES  AFFECTING  THE  DIVISION  OF  WEALTH  BETWEEN 

CAPITALISTS  AND  LABORERS,  AND  BETWEEN 

EMPLOYERS  AND  EMPLOYEES. 

AS  progress  is  made  in  the  arts  and  sciences,  the 
unnecessary  is  eliminated.  The  movement  is 
from  the  complex  to  the  simple.  The  rotary,  applying 
steam  directly  to  the  shaft  to  be  revolved,  takes  the 
place  of  the  reciprocating  engine  with  its  compli- 
cated attachments.  In  the  same  way,  the  real  science 
of  political  economy,  eliminating  needless  terminol- 
ogy, wastes  no  energy  tracing  distinctions  between 
capital,  for  instance,  and  "fixed  capital,"  "circulating 
capital,"  "productive  capital,"  "consumptive  capi- 
tal," "capital  goods,"  and  "economic  goods;"  or  be- 
tween employer  and  "entrepeneur"  or  "enterpriser," 
between  rent  and  "rent  bearers,"  or  between  pro- 
duction and  "inherent  productivity,"  "diminishing 
productivity,"  "uniform  productivity,"  "absolute 
productivity,"  "effective  productivity,"  etc.* 

Beginning  with  a  few  clear  and  comprehensive 
definitions,  and  insisting  that  wealth  can  only  include 
things  produced  by  human  toil,  it  assumes  that  the 
object  of  political  economy  is  to  determine  the  nat- 

*See  "The  Distribution  of  Wealtli,"  by  John  B.  Clarke,  Pro- 
fsssor  of  Political  Economy  at  Columbia  University;  a  typical 
text  book  on  political  economy  for  schools  and  colleges. 


180  The  Problem  of  the  Unemployed 

ural  laws  which  control  the  distribution  of  these 
things,  and  the  effect  on  such  distribution  of  man- 
made  laws;  that  since  capital  is  stored-up  labor, 
wealth  is  the  product  only  of  the  factor  labor  applied 
to  the  factor  land;  that  this  product  is  naturally- 
divided  between  these  two  factors  only — rent  to  land 
and  wages  to  labor,  interest  being  but  the  wages  of 
stored-up  labor ;  that  rent  is  tribute  extorted  by  priv- 
ilege, while  wages  is  reward  bestowed  upon  effort; 
that  under  present  conditions,  all  advancement  in 
the  arts  and  sciences,  in  labor-saving  processes,  in 
good  government,  in  public  and  private  morality, 
increases  the  tribute  extorted  by  privilege  without 
increasing  in  a  corresponding  degree,  if  at  all  in  the 
long  run,  the  reward  bestowed  upon  effort;*  that 
the  portion  of  the  reward  of  effort  which  goes  to 
labor  as  wages  is  divided  between  employer  and 
employee,  and  that  this  is  so,  even  when  the  worker 
is  his  own  employer.  Showing  the  causes  in  the  first 
place  which  affect  the  division  of  wealth  between 
land  owners  on  one  hand  and  capitalists  and  laborers 
on  the  other  hand,  it  next  in  natural  sequence  treats 
of  the  causes  affecting  the  division  between  capital- 
ists and  laborers,  of  the  portion  going  to  capital  and 
labor,  and  then  between  employer  and  employee  of 
the  portion  going  to  labor  alone. 

But  little  now  remains  to  be  added  to  this  chapter. 

Capital  is  something  which  in  itself  is  dead  and 
inert.  The  capitalist  is  simply  the  owner  of  capital, 
just  as  the  landlord  is  the  owner  of  land ;  the  former 
receives  interest  for  the  use  of  capital,  just  as  the 

*In  other  words,  it  makes  land  more  valuable  without  in- 
creasing rates  of  interest  or  the  wages  of  employers  and 
employees. 


TJie  Distribution  of  Wealth  181 

latter  receives  rent  for  the  use  of  land.  Supply  and 
demand  regulate  both  interest  and  rent.  With  in- 
crease of  population  and  improvement  in  the  arts, 
the  demand  for  capital  increases,  but  there  is  no 
increase  in  rates  of  interest,  because  the  supply  of 
capital  increases  as  fast  if  not  faster  than  the 
demand  for  it.  Every  additional  emigrant  coming 
to  this  country,  as  well  as  every  child  born  here,  has 
two  hands  with  which  to  produce  capital,  and  all 
inventions  and  improvements  which  make  it  easier 
to  produce  wealth  tend  to  increase  the  amount  of 
capital.  Not  so,  however,  as  to  land ;  the  demand  for 
it  is  constantly  increasing,  but  the  earth's  surface 
cannot  be  increased  to  the  extent  of  a  single  acre; 
therefore,  although  rates  of  interest  may  fall,  rent 
must  rise.  While  there  is  a  natural  monopoly  of  land 
which  becomes  more  intense  as  population  increases, 
there  can  be  no  natural  monopoly  of  capital;  since, 
with  free  access  to  unused  land,  labor  speedily  cre- 
ates and  accumulates  its  own  capital. 

In  new  countries  two  things  combine  to  make 
interest  rates  higher  than  in  old  and  thickly  settled 
ones ;  the  scarcity  of  capital  and  the  attractive  oppor- 
tunities for  its  investment  resulting  from  the  cheap- 
ness of  land.  While  high  rates  of  interest  attract 
capital  from  one  locality  to  another,  the  real  or  sup- 
posed insecurity  of  its  investment  in  new  countries, 
where  the  demand  for  it  is  greatest,  retards  its  flow 
to  such  countries,  and  delays  the  establishment  of  a 
common  level  of  interest  between  countries  or  com- 
munities in  which  land  is  cheap  and  those  in  which 
it  is  dear.  But  the  rapidity  with  which  wealth  is 
produced,  when  labor  has  comparatively  easy  acce-,:^^ 
to  the  bounties  of  nature,  brings  about  a  rapid  in- 


182  The  Problem  of  the  Unemployed 

crease  in  the  volume  of  capital  in  countries  where 
this  is  the  case,  and  reduction  in  rates  of  interest 
quickly  follows.  Thus,  in  the  United  States  today, 
while  labor  is  better  paid,  and  the  rewards  of  effort 
on  the  least  productive  lands  in  use  are  greater  than 
in  England,  the  government  borrows  money  for  3% 
and  less,  and  rates  of  interest  generally  are  little  if 
any  higher  than  in  that  country,  when  the  security 
is  equally  as  satisfactory.  A  comparison  of  rates  of 
interest  and  wages  in  New  Zealand  with  those  in 
England  leads  to  the  same  conclusion.  While  it  is 
true  that  the  high  price  of  land,  and  especially  of 
unused  land,  tends  to  reduce  rates  of  interest, 
because  of  its  paralyzing  effect  upon  industry,  never- 
theless the  removal  of  the  obstacles  to  employment, 
to  which  attention  has  been  called,  would  ultimately, 
as  already  shown,  so  enormously  increase  the  wage 
fund  or  permanent  wealth  of  the  world  that  rates  of 
interest,  with  increase  of  wealth,  would  inevitably 
decline.  Therefore,  if  rent  were  appropriated  by 
taxation  and  equitably  distributed  in  defraying  the 
expenses  of  government,  labor-saving  machinery 
and  improvements  of  every  character  would  result 
in  directly  increasing  the  portion  of  the  product 
going  to  labor,  including  the  wages  of  employees  as 
well  as  those  of  employers. 

Employers  who  are  mainly  interested  as  laborers 
and  capitalists  (using  their  own  or  borrowed  cap- 
ital) must  be  considered  apart  from  those  who  derive 
important  advantages  from  rent,  or  from  special 
privileges  or  combinations  in  restraint  of  trade.  The 
price  of  the  product  charged  by  them  is  fixed  by 
monopoly,  and  where  this  is  the  case,  fluctuations  in 
wages  have  little  to  do  with  the  price  demanded. 


The  Distribution  of  Wealth  183 

Thus,  while  the  mine-owning  employer  gets  more  f  or 
coal  now  than  he  did  twenty  years  ago,  he  pays  his 
employees  no  higher  wages ;  in  fact,  as  a  rule,  mine}\s 
probably  are  paid  less  now  than  formerly.  A  general 
increase  in  wages,  however,  is  often  used  as  an 
excuse  by  monopolists  for  advancing  prices,  and  any 
argument  in  favor  of  destroying  m^onopoly,  or  regu- 
lating its  charges,  is  frequently  m.et  with  the  asser- 
tion that  a  reduction  in  prices  would  cause  a  reduc- 
tion in  v/ages;  nevertheless,  there  is  no  real  con- 
nection between  wages  and  the  prices  of  articles 
controlled  by  monopolies,  or  the  charges  made  for 
services  rendered  by  them.  A  reduction  in  the  wages 
of  employees  of  a  gas  company  is  never  caused  by  a 
reduction  in  the  price  of  gas.  The  employer,  whether 
a  monopolist  or  not,  pays  as  little  as  he  can,  and  a 
gas  company  reduces  the  wages  of  its  employees 
whenever  it  can,  v/hether  forced  to  reduce  the  price 
of  gas  or  not.  The  wages  of  an  employee  depends, 
not  on  what  his  employer  can  afford  to  pay,  but  on 
v/hat  he  is  compelled  to  pay.  This  is  the  natural 
relation  of  employer  to  employee,  though  it  is  often 
tempered  by  kindness  and  sympathy. 

A  tariff-sustained  trust  may  enable  an  employer  io 
sell  steel  rails  at  double  the  cost  of  manufacture,  and 
to  accumulate  an  individual  fortune  of  hundreds  of 
millions;  but  the  laborer  who  assists  in  manufactur- 
ing protected  rails  receives  no  higher  wages  than  his 
fellow-laborer  across  the  way  who  assists  in  making, 
unprotected  brick.  Were,  for  instance,  the  tariff  of 
75  cents  per  ton  on  anthracite  coal  removed,  so  that 
the  coal  of  Nova  Scotia  could  compete  with  that  of 
Pennsylvania,  coal  could  be  cheaper;  but  the  wages 
of  miners  would  not  fall  on  this  account.    A  reduc- 


184  The  Problem  of  the  Unemployed 

tion  in  the  price  of  coal  would  simply  reduce  the 
profits  of  monopoly,  including  the  incomes  of  those 
who  own  the  coal  beds ;  but,  since  a  reduction  in  the 
price  would  be  followed  by  an  increase  in  the  con- 
sumption of  coal,  the  demand  for  the  labor  of  miners 
would  be  increased,  and  this  would  have  a  tendency 
to  enhance  rather  than  to  reduce  the  wages  of  miners. 
When  the  quinine  monopoly  was  destroyed  by  the 
removal  of  the  tariff  many  years  ago,  there  was  no 
reduction  in  wages.  On  the  contrary,  the  reduction 
in  the  price  of  quinine  from  several  dollars  an  ounce 
to  but  seventy-five  cents,  stimulated  its  consumption, 
and  more  than  doubled  the  number  of  laborers  em- 
ployed in  its  manufacture.  It  is  absurd  to  suppose 
that  the  putting  of  typewriters,  for  instance,  on  the 
free  list  would  affect  the  scale  of  wages  paid  by  the 
typewriter  trust.  In  fact,  if  the  trust  sold  type- 
writers in  this  country  for  $65,  the  price  at  which 
it  sells  them  abroad,  a  greater  number  of  typewriters 
would  be  used,  and  the  demand  for  labor  employed 
in  manufacturing  them  would  be  increased ;  and  this 
would  also  tend  to  enhance  rather  than  depress 
wages.  If  street  car  companies  in  great  cities  were 
allowed  to  charge  but  three  cents  where  they  now 
charge  five,  the  effect  would  simply  be  to  render  the 
franchises  of  these  companies  less  valuable.  Stock- 
holders could  not  recoup  themselves  by  reducing  the 
v/ages  of  employees.  On  the  contrary,  a  reduction 
in  the  price  of  the  service  would  tend  to  increase 
wages,  since  the  increased  amount  of  business 
brought  about  by  the  reduced  rates  would  increase 
the  demand  for  street  car  employees.  In  the  same 
way,  if  vesting  the  Interstate  Commerce  Commission 
with  power  to  fix  rates  would  have  the  ultimate  effect 


The  Distribution  of  Wealth  185 

of  reducing  freight  and  passenger  charges,  the  busi- 
ness of  railroads  would  be  to  some  extent  increased. 
This  would  necessitate  the  use  of  additional  railroad 
employees;  hence,  while  reduction  in  rates  might 
make  railroad  companies  less  able  to  pay  prevailing 
wages,  the  necessity  of  employing  more  laborers 
would  increase  rather  than  decrease  the  difficulty  of 
reducing  wages.* 

And  so,  as  could  be  shown  by  numberless  other 
illustrations,  in  every  enterprise  in  which  the  price 
of  the  product  or  the  price  of  the  service  rendered  is 
not  fixed  by  free  competition,  a  reduction  in  price 
can  in  no  way  affect  wages;  it  can  only  lessen  the 
margin  of  profit  to  the  land  owner  and  the  monopo- 
list. This  is  so  because,  while  the  price  of  the  prod- 
uct is  arbitrarily  fixed  by  a  monopoly,  the  wages  of 
employees  are  fixed,  not  by  the  demand  for  labor  on 
the  part  of  a  few  employers,  but  by  the  demand  on 
the  part  of  all  employers,  and  the  few  must  accom- 
modate themselves  to  the  scale  of  wages  established 
by  the  general  demand,  whether  they  feel  that  they 
can  afford  to  do  so  or  not. 

Considering  now  the  employer  as  an  employer 
only,  or,  in  other  words,  as  a  laborer  who  employs 
other  laborers  and  who  uses  his  own  or  borrowed 
capital,  it  will  be  found  that  his  wages  (popularly 
called  profits)  are  not  in  the  long  run  lessened  by  a 
general  rise,  nor  are  they  increased  by  a  general  fall 
in  the  scale  of  wages  of  employees.  In  this  connec- 
tion, reference  is  of  course  made  to  the  portion  of 
the  employer's  income  attributable  only  to  interest 

*The  great  reduction  in  railroad  rates  in  Texas.  brouRlit 
about  many  years  ago  by  a  fearless  railroad  commission,  did 
not  lessen  the  wages  ol'  railroad  employees  in  that  State. 


186  The  Problem  of  the  Unemployed 

and  to  labor;  it  does  not  include  the  portion  which 
may  be  due  to  rent,  or  to  special  privileges,  or  com- 
binations in  restraint  of  trade.  When  the  wages  of 
carpenters,  plumbers  and  painters,  for  instance,  are 
either  increased  or  decreased,  employers  regulate 
their  bids  accordingly,  and  the  contractor's  profits 
or  wages  are  unaffected.  And  this  is  so  as  to  mer- 
chants and  manufacturers  and  employers  in  all 
enterprises  in  which  the  price  of  the  product  is  reg- 
ulated by  the  cost  of  the  labor  employed  in  produc- 
ing it.  In  fact,  as  a  general  rule,  the  profits  or 
wages  of  employers  are  highest  in  countries  where 
the  wages  of  employees  are  highest.  Thus,  em.ploy- 
ers  make  greater  profits,  or  higher  wages,  in  Am.er- 
ica  than  in  Europe,  although  employees  are  paid 
more  here  than  there. 

The  non-monopolistic  employer  is  forced  by  com- 
petition to  reduce  the  price  of  his  products  to  the 
lowest  point  which  will  admit  his  remaining  in  busi- 
ness. And  vast  numbers  of  employers,  after  losing 
more  or  less  capital,  are  being  constantly  forced  out 
of  business  altogether.  It  is  impossible  for  com- 
petitive employers  to  pay  more  than  current  wages ; 
and  when  one  competitor  succeeds  in  reducing 
wages,  all  are  compelled  to  do  likewise;  for,  how- 
ever well  disposed  an  employer  may  be,  he  cannot 
avoid  the  effects  of  the  law  of  rent  and  the  law  of 
wages.  If  he  attempted  to  do  so  his  competitors 
would  quickly  force  him  out  of  business. 

The  wages  of  employers,  as  such,  v^^hen  the  losses 
of  the  unsuccessful  are  taken  into  account,  are  not 
excessive.  The  average  income  of  a  business  man, 
if  it  includes  only  interest  on  the  capital  used  and 
payment  for  services  rendered,  is  no  more  burden- 


The  Distribution  of  Wealth  187 

some  to  emploj'ees  than  interest  paid  for  the  use  of 
labor-saving  machinery.  The  law  of  supply  and 
demand  fixes  the  wages  of  the  skilled  manual  laborer 
at  considerably  more  than  that  of  the  unskilled 
laborer ;  yet  it  doubtless  gives  to  each  approximately 
the  correct  proportion  of  the  wealth  which  he  pro- 
duces, reference  being  had  not  to  the  amount  of  the 
Vvealth  to  which  each  may  be  entitled,  but  to  the 
proportion  in  which  it  is  divided  between  them.  And 
so,  as  between  the  employed  laborer  and  the  employ- 
ing laborer,  the  same  law  of  supply  and  demand 
probably  fixes  the  compensation  of  each,  near  the 
point  which  gives  to  each  the  proper  proportion  of 
the  wealth  produced  by  each  respectively.  If  the 
scale  of  wages  generally  were  raised  in  the  manner 
suggested  in  this  work,  the  wages  of  those  who 
employ  as  well  as  of  those  who  are  employed  would 
be  raised;  but,  on  account  of  the  general  improve- 
ment in  morals,  education  and  intelligence  which 
would  then  follow,  the  same  law  of  supply  and  de- 
mand would,  in  the  end,  decrease  the  difference 
between  the  wages  of  skilled  and  unskilled  and  em- 
ployed and  employing  labor.  This  would  come  about 
because  the  proportion  of  laborers  qualified  for  the 
highest  character  of  service,  and  to  whom  capitalists 
could  safely  intrust  the  use  and  management  of 
capital,  would  be  increased. 

When  Friday  landed  on  Robinson  Crusoe's  island, 
Crusoe,  we  will  say,  owned  every  foot  of  it  except 
the  highways,  together  with  exclusive  piscatory 
rights,  including  the  oysters  and  clams  on  the  sea- 
shore. Crusoe,  on  account  of  his  superior  mental 
and  physical  powers,  might  have  made  a  chattel 
slave  of  Friday,  but  there  was  no  necessity  for  it. 


188  The  Problem  of  the  Unemployed 

Crusoe's  ownership  of  all  the  land  gave  him  all  the 
advantage  of  the  slaveholder,  with  none  of  the  slave- 
holder's responsibilities  or  qualms  of  conscience.  In 
kindness  of  heart,  therefore,  Crusoe  arranged  to  give 
Friday  work,  and  in  order  that  he  might  be  abund- 
antly supplied  with  this  blessing,  he  fixed  his  wages 
at  the  equivalent  of  a  dollar  a  day  for  twelve  hours 
of  it,  which  was  just  sufficient  to  keep  Friday  in 
good  working  order,  provided  he  put  in  six  days' 
work  in  every  week.  Crusoe  then  told  Friday  that 
it  was  a  free  country,  and  that  he,  Friday,  was  a  free 
man,  and  as  such  could  work  for  a  dollar  a  day  or 
not,  just  as  it  suited  him.  Since  Crusoe  owned  all 
the  land,  Friday  had  the  free  man's  right  to  starve 
on  the  highway  or  work  on  Crusoe's  terms,  and  so 
he  went  to  work.  When  labor-saving  machinery  was 
introduced,  which  more  than  quadrupled  the  wealth 
which  Friday  produced,  who,  except  Crusoe,  by  any 
natural  law,  could  get  any  advantage  from  it  ?  Cru- 
soe could  still  pay  the  current  wage  of  a  dollar  a 
day  and  pocket  four  times  as  much  wealth  produced 
by  Friday.  Friday,  however,  would  begin  after  a 
while  to  feel  vaguely  that  there  was  something 
wrong  in  the  system  which  gave  Crusoe  all  this 
increased  wealth  produced  by  labor-saving  machin- 
ery, while  he,  Friday,  had  to  work  just  as  hard  as 
ever;  and,  having  learned  to  read  and  write  and  do 
a  trifling  amount  of  thinking,  Friday  would  get 
sulky  and  form  a  labor  union  and  go  on  a  strike. 
This  would  make  it  uncomfortable  for  Crusoe, 
although  he  could  hold  out  and  starve  Friday  into 
abject  submission  if  he  chose  to  do  so.  But  rather 
than  go  to  this  extremity,  and  provoke  the  rioting 
and  bloodshed  which  would  surely  follow,  he  would 


The  Distribution  of  Wealth  189 

make  a  compromise  of  it,  and  so  probably  reduce 
Friday's  hours  of  labor  a  trifle  and  perhaps  raise 
his  wages  a  little.  But  trouble  bet\veen  the  employer 
and  the  employee  would  not  end  with  this.  Friday 
would  always  be  sulking  and  demanding  more, 
because  he  would  be  becoming  more  intelligent, 
although  for  a  long  time  the  real  cause  of  the  failure 
of  his  wages  to  advance  with  the  increasing  amount 
of  wealth  produced  would  not  dawn  upon  him.  Fri- 
day's discontent  and  restlessness,  brought  about  to 
somie  extent  by  "agitators,"  would,  from  time  to 
time,  secure  small  advances  in  wages  and  slight  re- 
ductions in  hours  of  labor.  This  would  not  be  accom- 
plished naturally,  but  arbitrarily,  as  the  result  of 
constant  warfare  and  bickering,  accompanied  by 
immense  losses  from  strikes  and  lockouts,  causing 
bitter  feelings  between  the  employer  and  the  em- 
ployee. 

Now,  suppose  the  land  on  this  island  had  been 
owned  by  a  thousand  Robinson  Crusoes  instead  of 
but  one,  and  that  there  had  been  ten  thousand  Fri- 
days instead  of  but  one  Friday,  and  that  conditions 
there  were  the  same  as  in  the  world  today,  some  of 
the  Fridays  being  out  of  work  all  the  time  and  at 
all  times  ready  and  anxious  to  get  the  places  of  those 
who  had  work.  Why  would  not  competition  alone, 
among  those  who  must  have  jobs,  when  there  were 
not  jobs  enough  for  all,  reduce  wages  and  keep  wages 
at  the  point  at  which  the  common  laborers  could 
barely  subsist,  no  matter  what  might  be  the  increased 
amount  of  wealth  produced  with  the  aid  of  improve- 
ments in  labor  saving  appliances?  Would  not  this 
inevitably  be  the  case,  even  in  the  absence  of  any 
formal   combination  or  agreement  on  the  part  of 


190  The  Problem  of  the  Unemployed 

employers  fixing  rates  of  wages  ?  And  this  being  so, 
there  would  then  be  practically  thousands  of  slaves 
and  hundreds  of  slave-owners,  instead  of  one  slave 
and  one  slave-owner.  How  could  such  slave-like 
conditions  be  ameliorated  except  by  combinations  of 
laborers  ?  Combinations  which,  of  course,  many  sin- 
cere and  liberty-loving  people  would  denounce  and 
endeavor  to  suppress  by  law. 

Let  the  thoughtful  reader  ask  himself  in  what 
respects  the  situation  above  described  differs  from 
that  which  exists  in  the  industrial  world  today.  As 
already  shown,  employers  are  divided  into  two  gen- 
eral classes ;  the  unprivileged  employer  of  the  one 
class,  being  little  more  than  a  laborer  himself,  has 
nothing  to  gain  by  the  lowering  of  the  scale  of 
wages;  the  privileged  employer  of  the  other  class, 
however,  has  everything  to  gain  by  it,  because  his 
interests,  as  the  owner  of  valuable  land,  or  the  recip- 
ient of  other  special  privileges,  exceed  his  interests 
as  a  laborer  and  a  capitalist.  Unprivileged  employ- 
ers, however,  being  unable  to  see  beyond  the  first 
effects  of  a  reduction  of  wages,  and  having  no  knowl- 
edge of  the  underlying  cause  which  tends  to  grind 
themselves  down  as  well  as  their  employees,  and  in 
fact  being  powerless  to  do  otherwise,  join  hands 
with  privileged  employers  in  efforts  to  prevent  an- 
increase  or  bring  about  a  decrease  in  wages.  In 
this,  they  are  assisted  by  the  natural  tendency  of 
wages  to  fall  with  increase  of  population,  coupled 
with  an  artificial  scarcity  of  land. 

We  are  always  hearing  of  the  struggle  between 
capital  and  labor,  when  in  point  of  fact  it  is  never 
between  capital  and  labor,  but  always  between  those 
who  are  principally  interested  as  the  owners  of  val- 


The  Distribution  of  Wealth  191 

liable  land  or  as  the  recipients  of  special  privileges  on 
the  one  side,  and  those  who  own  capital  and  those 
who  perform  labor  on  the  other  side.  The  real 
interests  of  capital  and  labor  are,  in  the  very  nature 
of  things,  harmonious,  but  always,  in  point  of  fact, 
antagonistic  to  landlordism  and  monopoly. 

Under  present  conditions,  the  tendency  of  wages 
of  employees  to  fall  can  only  be  resisted  by  trade 
unions,  and  by  public  sentiment,  which  favors  the 
paying  of  a  living  wage.  These  powers  of  resistance 
have  so  far,  to  some  extent,  prevailed  as  to  skilled 
manual  labor,  which  can  more  easily  protect  itself 
by  combinations,  and  in  many  instances  hours  of 
labor  have  been  lessened  and  wages  of  employees 
increased.  But  the  struggle  against  advancing  pop- 
ulation and  an  artificial  scarcity  of  land  must  finally 
prove  a  hopeless  one.  Labor  unions,  strikes,  boj^- 
cotts,  riots,  and  even  bloodshed,  can  accomplish  little 
in  the  end  against  the  irresistible  law  of  rent.  From 
the  very  nature  of  rent,  as  heretofore  shown  and 
illustrated,  it  follows  with  mathematical  certainty 
that  the  wages  of  a  large  and  constantly  increasing 
class  of  laborers  must  ultimately  fall,  even  in  this 
country,  to  the  starvation  point,  and  the  tendency 
in  this  direction,  under  existing  conditions,  will  be- 
come more  and  more  marked  as  the  price  of  unused 
land  increases. 

What  of  hope  has  the  future  then  in  store  for  the 
average  working  man?  There  is  no  hope  for  him 
under  present  conditions.  Yet  we  are  all  the  time, 
with  accelerating  ratio,  inventing  more  and  more 
wonderful  labor-saving  machines ;  we  are  thought  to 
be  on  the  very  eve  of  discoveries  which  will  revolu- 
tionize industries  and  increase  the  total  output  of 


192  The  Problem  of  the  Unemployed 

the  comforts  and  luxuries  of  life  almost  beyond  the 
power  of  the  imagination  to  conceive.  But  the  lot  of 
the  average  working  man  will  not  improve.  With 
increase  of  population,  it  will  grow  worse  and  worse 
— even  here  in  America.  The  present  industrial  sys- 
tem contains  in  it  no  promise  of  relief  in  the  future 
to  its  millions  of  victims ;  it  holds  out  to  them  no  hope 
of  beneficial  participation  in  the  glories  of  an  advanc- 
ing civilization.  The  ability  of  the  laborer  to  produce 
wealth  may  be  multiplied  ten-fold  or  a  hundred-fold, 
or  even  a  thousand-fold,  by  further  and  yet  more  and 
more  wonderful  improvements  in  labor-saving  de- 
vices, but  this  will  not  change  the  iron  law  of  wages. 
Armies  of  unemployed  seeking  work  and  unable  to 
find  work  will  then  as  now  compete  for  employment 
against  the  employed,  and  continue  in  the  future  as 
in  the  past  to  drag  wages  toward  the  starvation 
point,  while  millionaires,  and  billionaires  even,  in- 
crease and  multiply. 


CHAPTER  XIV. 
THE   ULTIMATE   REMEDY. 

AND  WHY  IT  SHOULD  BE  CONSIDERED  BY  THE 
POLITICAL   ECONOMIST. 

FROM  what  has  so  far  been  shown  it  is  evident 
that  the  failure  of  labor-saving  machinery  to 
bring  about  a  vast  change  for  the  better  in  the  con- 
dition of  labor  is  due  to  the  fact  that  such  improve- 
ments increase  rent  without  increasing  wages.  It 
is  also  equally  clear  that  one  of  the  reasons,  if  not 
the  reason,  why  men  willing  to  work  are  so  often 
out  of  work,  is  because  individuals  can  profitably 
withhold  valuable  land  from  use  entirely,  as  well  as 
from  the  use  to  which  it  is  best  adapted.  Having 
ascertained  the  cause,  the  remedy  is  obvious.  It 
consists  in  a  simple  change  in  the  application  of  the 
taxing  power  of  government.  The  question  to  be 
first  determined,  in  this  connection,  however,  is  not 
whether  the  change  could  be  justly  made,  but 
whether  it  would  have  the  effect  intended.  Should 
this  be  decided  in  the  affirmative,  it  will  then  be  in 
order  to  show,  if  possible,  how  all  who  own  land 
and  who  have  invested  the  fruits  of  honest  toil  in 
its  purchase  can  be  suitably  compensated  for  the  loss 
of  the  privileges  which  its  ownership  now  confers. 
But  whether  this  be  shown  or  not,  the  discussion  of 
the  remedy  which  must  ultimately  be  adopted  will, 
in  any  event,  bring  out  more  clearly  the  underlying 


194  The  Problem  of  the  U7iemployed 

cause  which  accounts  for  low  wages  and  involuntary- 
idleness. 

When  industrial  conditions  shall  have  been  regu- 
lated in  harmony  with  natural  laws,  everything 
which  increases  the  ability  of  man  to  produce  wealth 
will  necessarily  increase  the  wages  of  the  laborer. 
Mechanical  inventions  will  then  lighten  the  toil  of 
the  working  man  and  add  to  his  happiness  and  inde- 
pendence. He  will  no  longer  look  upon  them  with 
doubt  and  trembling,  for  his  wages  will  keep  pace 
with  the  increase  in  the  wealth-producing  power 
which  labor-saving  processes  confer.  Nor  will  he 
dread  the  competition  of  his  fellow  laborers,  for  no 
obstacle  will  then  prevent  the  use  of  the  unused  nat- 
ural opportunities  for  employment  abounding  on 
every  hand.  Until  such  conditions  prevail,  labor  will 
never  be  satisfied,  for  neither  the  moral  nor  the  nat- 
ural law  can  be  fulfilled  so  long  as  progress  in  the 
arts  and  sciences  fails  to  benefit  directly  all  who  toil. 

Socialists  insist  that  the  only  way  in  which  the 
laborer  can  retain  the  wealth  which  he  produces  is 
through  control  by  the  government  of  all  the  factors 
of  production,  including  capital  and  labor  as  well  as 
land.  Failing  to  realize  that  liberty  is  the  dearest  of 
human  possessions,  the  socialist  dreams  of  substi- 
tuting the  benevolent  tyranny  of  a  bureaucracy  for 
the  selfish  tyranny  of  individual  employers.  Failing 
to  appreciate  the  fundamental  distinction  between 
ownership  of  land  and  the  ownership  of  things  pro- 
duced by  human  labor,  or  between  the  values  cre- 
ated by  the  individual  and  those  created  by  the  com- 
munity, he  confuses  capital  with  privilege  and 
assumes  that  justice  will  only  be  reached  when  indi- 
vidual ownership  of  both  is  abolished. 


The  Ultimate  Remedy  195 

The  teachings  of  the  political  economists  of  the 
new  school,  however,  differing  from  those  of  the 
socialists,  may  be  summed  up  as  follows: 

First,  Every  individual  can,  without  injury  to 
others,  and  in  harmony  with  natural  law,  appro- 
priate to  himself  all  the  wealth  which  he  produces, 
be  it  ten  times  or  a  hundred  times  greater  than  that 
produced  by  another. 

Second.  The  natural  law  demands  equality,  not 
in  the  enjoyment  of  the  rewards  of  effort,  but  in  the 
opportunities  for  applying  effort,  it  being  the  con- 
cern of  the  State,  as  Ida  M.  Tarbell  says,  to  see  that 
men  have  equal  opportunities  to  carry  on  enter- 
prises rather  than  to  conduct  enterprises  for  them. 

Third.  Land — the  earth — is  in  effect  a  great 
storehouse,  filled  to  overflowing  with  treasures  pro- 
vided by  nature  for  the  equal  use  and  enjoyment  of 
all  mankind,  and  human  laws  which  permit  some 
men  to  extort  tribute  from  other  men  for  the  privi- 
lege of  access  to  these  treasures  violate  natural  law ; 
hence  the  confusion,  waste  and  distress  which  at 
present  characterize  industrial  conditions. 

Fourth.  Obedience  to  the  natural  law,  with 
respect  to  the  bounties  of  nature,  can  be  secured  by 
requiring  all  who  enjoy  the  privilege  of  the  exclusive 
possession  of  any  portion  of  the  earth  to  pay,  in  the 
form  of  a  tax  for  the  support  of  government,  approx- 
imately what  such  privilege  is  worth. 

Political  freedom  does  not  in  itself  prevent  indus- 
trial vslavery.  Whatever  the  form  of  government, 
material  progress  under  present  conditions  only 
increases  the  dependency  of  the  employee  upon  the 
employer,  while  with  the  spread  of  intelligence  the 
employee  becomes  more  and  more  discontented  with 
the  slave-like  conditions  under  which  he  is  compelled 
to  toil.  To  escape  the  tyranny  of  the  employer,  the 
employee  submits  to  the  tyranny  of  the  labor  union. 


196  The  Problem  of  the  Unemployed 

The  struggle  for  freedom,  however,  will  not  down. 
From  the  turmoil  and  suffering  in  which  the  labor 
situation  is  now  involved,  peace  must  finally  be 
evolved;  that  it  will  be  the  peace  of  freedom,  and 
not  of  slavery,  is  the  conviction  of  all  who  believe  in 
the  ultimate  triumph  of  righteousness. 

Let  us,  therefore,  postponing  consideration  of  the 
method  of  its  accomplishment,  which  perhaps  cannot 
be  predicted  with  certainty,  imagine  conditions 
which  would  prevail  when  the  inalienable  right  of 
every  man  in  the  use  of  the  gifts  of  nature,  including 
land  as  well  as  air  and  water,  is  at  last  recognized 
by  law  and  custom.  Land  will  then  in  effect  be 
nationalized,  but  individuals  will  continue  to  own  it. 
The  people,  while  enjoying  the  benefits  of  govern- 
ment ownership,  will  escape  the  evil  connected  with 
such  ownership.  There  will  then  be  no  such  thing  as 
taxation.  The  words  "tax"  and  "taxation"  will 
remain,  but  taxes  and  the  burden  of  taxation  will  in 
reality  have  been  abolished.  The  rent  which  indi- 
viduals now  appropriate  will  then  be  appropriated 
by  the  government,  and  collected  in  the  form  of  a 
direct  tax  on  land  alone,  according  to  its  value, 
regardless  of  improvements.  Rent,  or  in  other  words 
privilege,  only  will  be  taxed.  The  revenues  thus 
derived  from  the  rent  of  land  will  be  sufficient  to 
enable  the  government  to  dispense  with  every  species 
of  taxation  now  practiced.  All  who  then  pay  taxes 
will  in  effect  simply  pay  the  government  rent  for 
the  land  on  which  the  taxes  are  levied.  While  indi- 
viduals will  continue  to  hold  the  legal  title  to  land, 
the  beneficial  ownership  will  be  in  the  people  at 
large.  The  values  created  by  the  community  will 
then  go  to  the  community;  now,  individuals  appro- 


The  Ultimate  Rcmedij  197 

priate  these  values  which  others  create.  No  change 
in  the  machinery  in  use  at  the  present  time  for 
collecting  direct  taxes  will  be  necessary.  The  tax 
will  be  so  adjusted  as  to  take  neither  more  nor  less, 
approximately,  than  the  economic  rent  of  land; 
therefore,  there  will  be  no  profit  in  the  mere  owner- 
ship of  land.  As  land  increases  in  value  the  tax  will 
increase,  and  the  unearned  increment  will  go  to  the 
government,  as  it  now  goes  to  individuals;  hence 
unused  land  will  be  free  land,  and  there  will  then  be 
no  profit  in  owning  land  without  devoting  it,  by 
means  of  appropriate  improvements,  to  the  use  to 
which  it  is  best  adapted.  Land  will  continue  to  be 
bought  and  sold,  and  it  will  descend  to  heirs  and 
devisees  just  as  it  does  at  present;  but  the  selling 
price  will  not  exceed,  approximately,  the  value  of 
the  improvements  on  it.  Private  property  in  things 
produced  by  human  toil  will  be  even  better  safe- 
guarded than  at  present,  for  no  man  will  be  permit- 
ted to  take  a  portion  of  another  man's  earnings  for 
merely  assenting  to  the  other's  employment.*  Equal- 
ity in  the  use  of  the  bounties  of  nature  will  thus  be 
attained.  For  those  who  enjoy  the  privilege  of  the 
exclusive  possession  of  any  portion  of  the  earth  will 
then  pay  in  the  form  of  a  tax  what  the  privilege  is 
worth,  while  those  who  do  not  enjoy  such  privi- 
leges will  pay  no  taxes ;  hence  the  burden  of  taxation 
will  no  longer  fall  upon  industry  and  enterprise. 

An  illustration  of  what  might  be  made  universal 
is  seen  in  the  section  of  school  land  formerly  belong- 
ing to  the  State  of  Illinois,  on  which  a  portion  of  the 
City  of  Chicago  is  now  located.    The  small  remnant 

*See  Chapter  IV,  on  The  Nature  of  Rent. 


198  The  Problem  of  the  Uneynployed 

of  this  land  still  owned  by  the  State  has  for  many 
years  been  leased  to  private  parties  on  terms  pro- 
viding for  perpetual  renewals  and  with  no  restric- 
tions against  subleasing.  The  lessee  was  required  to 
pay  as  rent  six  per  cent  of  the  value  of  the  land, 
exclusive  of  improvements  on  it,  the  land  to  be 
re-appraised  every  five  years.  As  the  land  increased 
in  value  the  rent  increased,  and  the  ground  rent 
collected  by  the  government  in  this  way  amounted 
approximately  to  the  economic  rent  of  the  land, 
according  to  the  definition  of  economic  rent  hereto- 
fore given.  The  lease  being  perpetual,  the  lessee  is 
as  secure  in  the  ownership  and  enjoyment  of  the 
improvements  on  the  land  as  he  would  be  if  he  ovv^ned 
the  land  in  fee  simple.  The  government  as  a  land- 
lord took  approximately  the  entire  economic  rent 
and  used  it  for  the  support  of  the  public  schools. 
The  situation  was  the  same,  however,  as  if  the  State 
in  the  first  instance  had  deeded  the  land  outright  to 
the  original  lessees,  reserving  as  a  condition  to  its 
continuous  enjoyment  the  payment  of  an  annual  tax 
of  six  per  cent  on  its  value  as  unimproved  land. 

The  lot  occupied  by  the  Chicago  Tribune  building 
is  a  part  of  this  school  section,  and  until  recently 
was  leased  in  this  manner  to  the  Chicago  Tribune 
Publishing  Company.  When  last  appraised,  it  was 
valued  at  $789,600.  Six  per  cent  of  this  amount,  or 
$47,000,  would  have  been  the  annual  ground  rental 
under  such  appraisement  for  the  ensuing  five  years, 
had  not  the  tenure  been  changed.  The  building  on 
the  land  is  worth  a  million  dollars,  and  its  owners 
would  thus  have  paid  the  State  $47,000  a  year  for 
the  privilege  of  the  exclusive  possession  of  the  land 
which  the  building  occupied.     It  would  not  have 


The  Ultimate  Remedy  199 

occurred  to  them,  however,  that  they  were  paying 
any  tax  in  this  connection,  since  they  were  receiving 
the  use  of  land  worth  $780,000,  which  the  people  of 
the  State  of  Illinois  owned.  But  had  the  land  been 
granted  by  the  State  to  the  Tribune  Company,  and 
its  successors  and  assigns  forever,  with  a  reserva- 
tion to  the  effect  that  it  should  be  perpetually  sub- 
ject to  the  payment  of  a  direct  tax  sufficient  to  absorb 
the  entire  economic  rent,  the  same  thing  would  have 
been  accomplished.  The  use  of  the  word  "tax"  in- 
stead of  the  word  "rent,"  and  the  omission  of  all 
reference  to  leasing,  would  have  made  no  difference. 
No  one  holding  land  under  such  a  grant  would  feel 
that  he  was  paying  anything  more  than  rent  when 
he  paid  in  the  form  of  a  tax  the  equivalent  of  rent. 
And  so  it  will  be  when  all  are  permitted  to  use  the 
bounties  of  nature  on  equal  terms. 

As  already  shown,  when  the  values  produced  by 
society  at  large  are  thus  appropriated  for  govern- 
mental purposes,  land,  exclusive  of  improvements, 
will  have  no  selling  value.  The  value  of  the  ground 
itself  will  add  nothing  to  the  purchase  price  of  real 
estate.  Since  land  will  have  cost  its  owner  nothing, 
the  so-called  tax  which  he  will  pay  for  the  privilege 
of  its  exclusive  possession  will,  in  fact,  be  no  tax  at 
all ;  it  will  simply  be  rent  collected  as  taxes  are  now 
collected.    It  will  be  a  tax  in  name  only. 

Had  all  of  the  640-acre  school  section  been  con- 
veyed gratuitously  to  private  owners  in  the  first 
instance,  on  terms  requiring  the  payment  of  the 
economic  rent  to  the  State  in  the  form  of  a  tax,  the 
people  of  Illinois  would  now  be  enjoying  an  income 
from  it  of  over  $20,000,000  a  year.  The  improve- 
ments on  this  section  of  land  would  have  not  been 


200  The  Problem  of  the  Unemployed 

any  less  extensive  or  less  valuable,  nor  would  the 
city  have  grown  less  rapidly.  The  buildings  on  the 
remnant  of  the  land  held  under  leases  of  this  char- 
acter are  fully  up  to  average  of  those  in  the  same 
neighborhood  on  privately  owned  land.  The  Chicago 
Savings  Bank,  recently  completed  at  a  cost  of 
$650,000,  stands  on  school  land  thus  leased  in  this 
way  to  that  institution.  The  State  now  collects  as 
taxes  a  portion  of  the  economic  rent ;  why  should  the 
possession  of  land  be  less  secure  if  the  State  col- 
lected all  of  it?  And  if  improvements  were  not 
taxed,  why  would  not  men  be  even  more  inclined  to 
improve  land,  especially  since  no  capital  would  then 
be  sunk  in  its  purchase? 

Under  the  present  system,  if  the  owner  of  land 
fails  to  pay  the  taxes  levied  against  it,  he  loses  his 
improvements  as  well  as  his  land ;  this  would  not  be 
the  case,  however,  under  the  system  which  must 
ultimately  prevail.  When  ground  rent  only  is  taxed, 
it  will  be  practicable  to  provide  for  fully  compen- 
sating the  previous  owner  for  all  improvements  on 
land  sold  for  taxes.  And  not  only  so,  but  an  auto- 
matic check  will  always  guard  against  the  levy  of 
taxes  in  excess  of  economic  rent.  All  of  this  is  clearly 
explained  in  "Natural  Taxation,"  by  the  late  Thomas 
G.  Shearman,  in  the  following  paragraphs,  which 
are  quoted  in  full : 

"When  taxation  is  levied  exclusively  upon  ground 
rent  every  man  will  have,  for  the  first  time  in  human 
history,  an  absolute  and  indefeasible  title  to  all  of 
his  property  which  is  the  production  of  human  skill 
and  industry,  subject  only  to  the  right  of  the  State  to 
take  it,  upon  making  full  compensation  for  its  value. 
Such    compensation    would    enable    the    owner    to 


The  Ultimate  Remedy  201 

replace  the  property  thus  taken  with  other  property 
of  the  same  description  and  value.  This  general 
right  of  the  State  is  practically  no  limitation  upon 
the  absolute  right  to  individual  property. 

"It  is  perfectly  plain  that  no  one  has  any  such 
right  at  present,  and  that  no  one  can  have  it,  under 
any  existing  system  of  taxation.  For,  so  long  as  the 
State  assumes  the  right  to  tax  anything  besides 
rent,  it  is  impossible  for  any  man  to  retain  the  entire 
fruits  of  his  own  industry.  Every  year  the  State  will 
deduct  something  from  those  fruits,  under  the  name 
of  taxation ;  and  no  one  can  ever  foresee  precisely 
how  much  will  be  taken  in  this  manner.  The  fluc- 
tuations, both  in  the  amounts  and  methods  of  such 
taxes,  are  so  great  and  incalculable  that  no  one  can 
have  any  reasonable  certainty  as  to  the  extent  to 
v;hich  his  earnings  will  be  secure  against  the 
demands  of  the  State. 

"But  if  taxes  were  once  confined  strictly  to  ground 
rent,  all  this  would  be  changed.  Chattels  of  every 
description  would  of  course  be  absolutely  secure; 
since  the  only  remedy  which  would  be  allowed  to  the 
State  for  the  collection  of  taxes  would  be  the  sale  of 
some  exclusive  privilege  on  land.  But  buildings  and 
all  other  improvements  on  land  would  be  equally 
secure  against  all  taking  without  compensation. 
This  is  not  at  first  sight  so  clear ;  and  it  needs,  there- 
fore, fuller  explanation. 

"The  exclusive  tax  upon  ground  rent  would  lose 
its  entire  character  if  the  State  were  allowed,  under 
any  pretense,  to  collect  it  from  personal  property  or 
im.provements.  It  is  a  fundamental  condition  of 
such  a  tax  that  it  be  collected  only  out  of  rent.  It 
must,  therefore,  when  payment  is  refused,  be  col- 
lected only  by  selling  the  control  of  the  taxed  land 
to  some  person  who  will  not  only  pay  the  tax,  but 
will  also  pay  the  land  holder,  thus  sold  out,  the  full 
value  of  all  of  his  improvements.  If  no  one  will  pay 
the  tax,  subject  to  those  conditions,  that  is  conclu- 
sive proof  that  the  tax  is  too  high,  ^il(\.  that  it  is  in 


202  The  Problem  of  the  Unem^yloyed 

reality  based  upon  an  assessment  including  other 
values  than  the  mere  value  of  the  land.  The  pur- 
chaser in  such  case  would,  of  course,  take  the  land, 
subject  to  the  annual  liability  for  taxes;  but  he 
would  also  acquire  the  same  absolute  title  to  im- 
provements which  the  previous  possessor  had;  so 
that  he,  in  turn,  could  not  be  sold  out  for  taxes  with- 
out full  compensation  for  improvements.  Thus  no 
one  would  ever  pay  taxes  upon  the  value  of  any 
other  property  than  the  bare  land. 

"Universal  experience  has  demonstrated  that 
there  would  not  be  the  slightest  difficulty  in  carrying 
such  a  system  into  practical  operation.  This  system 
has  long  been  in  operation,  upon  a  great  scale,  both 
in  public  and  private  affairs.  Wherever  ferry  fran- 
chises belong  to  a  municipality,  as  in  the  city  of  New 
York,  such  franchises  are  sold  at  auction,  at  inter- 
vals of  five  or  ten  years,  always  subject  to  two  con- 
ditions :  first,  the  payment  of  rent  to  the  munici- 
pality ;  and  second,  the  payment  of  full  compensation 
to  the  former  holder  of  the  franchises,  for  boats, 
piers,  houses,  and  all  other  structures  and  materials 
used  in  operating  the  ferry.  Street  railroad  fran- 
chises are  sold  in  the  same  manner,  for  terms  of 
years,  by  every  honest  municipal  body  having  con- 
trol of  the  subject.*  So  landlords  constantly  lease 
their  land  for  terms  of  years,  to  men  who  erect 
expensive  buildings  therecn ;  the  landlords  cove- 
nanting to  pay  the  value  of  such  improvements  upon 
the  expiration  of  the  lease.  There  is  no  more  diffi- 
culty in  providing  for  an  annual  sale  of  land,  if 
necessary,  subject  to  these  conditions,  than  there  is 
in  providing  for  a  sale  in  every  five,  ten  or  twenty 
years.   A  ferry  franchise  is  just  as  much  a  title  to 

*"Tlie  conception  of  a  really  incorruptible  city  council  will 
seem,  to  most  American  readers,  too  wildly  improbable  for 
the  basis  of  even  a  theory.  But  effete  Europe  is  so  far  behind 
us  in  the  grand  march  of  civilization,  that  such  Utopian  bodies 
are  quite  common  there;  and  the  method  of  the  text  is  com- 
mon also." 


The  Ultimate  Remedy  203 

'land,'  within  the  meaning  of  the  law,  science  and 
common  sense,  as  is  any  other  land  title  whatever.* 
"Of  course,  the  valuation  of  improvements  would 
be  made  upon  a  common  sense  basis.  The  land- 
owner, upon  making  default  in  taxes,  would  be  enti- 
tled to  just  as  much  compensation  for  his  buildings 
as  those  buildings  really  added  to  the  market  value 
of  the  land  on  which  they  were  built,  but  not  more. 
If,  as  often  happens,  an  expensive  building  had  been 
put  up  in  a  district  where  it  could  never  be  of  any 
use,  nothing  should  be  allowed  for  it  beyond  the 
value  of  its  materials,  after  it  had  been  pulled  down. 
But  for  any  really  useful  building,  compensation 
would  be  allowed,  sufficient  to  enable  the  owner  to 
put  up  a  similar  building,  in  similar  condition,  upon 
an  adjoining  tract  of  land.  In  short,  whatever  loss 
the  owner  of  the  building  incurred,  by  reason  of  his 
own  mistakes  or  extravagance,  he  would  be  left  to 
bear;  but  whatever  value  belonged  to  the  building, 
exclusive  of  the  land  underneath  it,  he  would  invar- 
iably be  allowed  to  retain." 

No  difficulty  will  be  experienced  in  so  fixing  the 
amount  of  the  tax  as  to  take  approximately  the 
whole  of  the  economic  rent  of  any  tract  of  land.  A 
few  illustrations  will  make  this  plain :  My  neighbor 
owns  a  single  lot,  which,  with  the  dwelling  house 
improvements  on  it,  rents  for  $400  a  year.  The 
improvements  are  appropriate  to  the  location,  and 
are  worth  $3,000.  The  prevailing  rate  of  interest 
in  this  community,  when  the  security  is  ample,  is 
h%.  Allowing  5%  interest  on  the  value  of  the  im- 
provements, and  say,  $125  a  year  to  cover  insurance, 
repairs,  renewals  and  the  expense  of  collecting 
rents  from  tenants,  etc.,  and  the  economic  rent  of 
this  lot  is,  approximately,  $125  a  year.    It  is  $150+ 

♦Rf-nson   v.  Nrw  York,   10  Barbour.  22:?.  233. 


204  The  Problem  of  the  Unemployed 

?^125=$275;  $400— $275=$125.  The  tax  on  it 
therefore  would  be  fixed  at  about  $125.  Adjoining 
these  premises  there  are  four  lots  on  which  there 
are  dwelling  house  improvements  also  of  the  value 
of  $3,000.  These  lots  and  improvements  belong  to 
another  neighbor  who  can  afford  the  luxury  of  spa- 
cious grounds,  but  each  lot  being  equally  as  valuable 
as  the  one  first  mentioned,  his  taxes  would  be  four 
times  as  much,  or  $500  a  year.  As  when  a  man  goes 
to  the  theatre,  if  he  chooses  to  appropriate  four 
seats  instead  of  one,  he  must  pay  accordingly, 
whether  he  uses  all  of  them  or  not. 

Again,  the  building  in  which  I  have  an  oflice 
brings  its  owner  a  total  net  rental  of,  say,  $13,000  a 
year,  after  all  deductions  for  insurance,  renewals, 
cost  of  collecting  rents,  etc.,  have  been  made.  It  can 
be  duplicated  for  $100,000,  interest  on  which  is 
$5,000  a  year;  hence  the  economic  rent  of  the  land 
which  it  occupies  is  approximately  the  diflFerence 
between  $13,000  and  $5,000,  or  $8,000,  which  would 
be  about  the  amount  of  the  tax  levied  against  the 
land  if  the  rent  were  appropriated  by  the  govern- 
ment. On  one  of  the  opposite  corners  is  a  building 
worth  $40,000,  which  brings  its  owner  a  net  rent 
of  $10,000  a  year.  Making  the  calculation  as  shown 
above,  and  it  is  found  that  the  economic  rent  of  the 
lot  on  which  it  stands  is  also  $8,000.  But  on  another 
corner  is  a  tumble-down  one  story  building  which 
rents  for  only  $6,000.  The  lot  on  which  it  rests  is 
not  less  valuable  than  those  on  the  other  corners, 
and  if  appropriately  improved  it  would  yield  the 
same  amount  of  rent ;  hence  the  tax  assessed  against 
it  would  be  the  same.  In  other  words,  the  owner  of 
the  legal  title  to  this  last  lot  would  pay  the  State  the 


The  Ultimate  Remedy  205 

same  amount  of  rent,  whether  he  properly  im- 
proved it  or  not. 

Sales  of  improved  real  estate  would  also  furnish 
the  tax  assessor  data  from  which  the  economic  rent 
of  land  could  be  ascertained.  Just  as  the  thermom- 
eter tells  whether  the  temperature  is  above  or  below 
normal,  so  would  prices  paid  for  improved  landed 
property  tell  whether  the  taxes  assessed  against  it 
were  too  high  or  too  low.  Thus,  if  real  estate  in  any 
locality  should  sell  for  decidedly  more  than  the  value 
of  the  improvements — if  people  were  willing  to  pay 
much  more  for  a  tract  of  land  than  the  improve- 
ments on  it  were  worth — this  would  be  a  certain 
indication  that  the  tax  levied  against  it  should  be 
raised.  If,  on  the  contrary,  real  estate  were  sold 
for  taxes,  under  the  provision  heretofore  explained, 
which  would  require  the  purchaser  to  fully  compen- 
sate the  previous  owner  for  the  value  of  the  im- 
provements, this  would  usually  indicate  that  the 
taxes  should  be  lowered. 

It  is  not  claimed  that  taxes  will  ever  be  assessed 
with  mathematical  accuracy,  or  that  it  is  desirable 
even  for  the  government  to  take  literally  all  of  the 
theoretical  economic  rent  of  land.  Those  who  occupy 
land  will  directly  or  indirectly  pay  the  tax,  but  those 
who  own  the  land  will  often  act  as  tax  gatherers, 
and  for  this  service  compensation  will  be  provided 
by  the  laws  of  supply  and  demand.  Thus,  a  man 
having  $20,000  contemplates  erecting,  say,  ten 
dwellings  costing  $2,000  each.  To  make  the  invest- 
ment profitable  it  will  be  necessary  to  collect  from 
his  tenants,  in  addition  to  interest,  a  sufficient 
amount  to  cover  the  tax  paid  on  the  land  occupied, 
as  well  as  the  cost  of  insurance,  repairs  and  renew- 


206  The  Problem  of  the  Unemployed 

als.  He  must,  therefore,  become  in  effect  a  tax  col- 
lector for  the  government,  and  not  only  so,  but  to  a 
certain  extent  a  guarantor  of  the  payment  of  the  tax. 
And  so  when  any  one  puts  improvements  on  land, 
either  for  a  home  for  himself  or  for  any  other  pur- 
pose, there  is  always  an  element  of  risk  in  the  invest- 
ment which  the  renter  does  not  incur.  Increase  or 
decrease  of  population  in  the  neighborhood,  as  well 
as  other  circumstances,  may  render  improvements 
unsuitable  to  changed  conditions,  and  impair  if  not 
destroy  the  value  of  them  altogether.  Men  will  not 
make  investments  involving  such  risks,  and  often 
requiring  them  to  act  as  tax  collectors,  unless  paid 
for  it.  Therefore,  it  is  not  likely  that  the  govern- 
ment can  ever  collect  more  than  80  or  90  per  cent 
of  the  theoretical  economic  rent.  The  remainder  of 
it  will  be  retained  by  land  owners  to  cover  the  risk 
involved  in  improving  land  and  the  labor  involved 
in  collecting  from  those  who  actually  use  land  what 
the  use  of  it  is  worth.  But  competition,  which  will 
then  be  free  with  respect  to  land,  will  always  so  fix 
the  amount  of  the  tax  as  to  give  land  owners  no 
more,  approximately,  than  they  will  be  equitably 
entitled  to  for  such  service. 

It  may  be  asked,  why  will  not  landlords  be  able  to 
retain  more  than  ten  or  twenty  per  cent  of  the  eco- 
nomic rent  of  land  which  tenants  occupy?  The 
answer  is,  that  rents  are  regulated  wholly  by  supply 
and  demand,  the  desire  of  landlords  having  little  to 
do  with  the  matter.  If  the  demand  for  houses  in 
any  locality  exceeds  the  supply,  rents  (using  the 
word  in  its  popular  sense)  will  rise;  if  the  supply 
exceeds  the  demand,  rents  will  fall.  With  no  tax 
on  buildings,  and  land  owners  being  no  longer  fined 


The  Ultimate  Remedy  207 

for  putting  improvements  on  land,  a  demand  for 
houses  will  be  more  easily  supplied  than  under  pres- 
ent conditions;  it  will,  therefore,  be  impossible, 
except  temporarily,  to  charge  more  for  the  use  of 
real  estate  than  the  economic  rent  of  land  added  to 
interest  on  the  value  of  the  improvements,  together 
with  allowances  for  insurance,  repairs,  etc. 

The  question  asked,  however,  when  put  in  the 
concrete  answers  itself.  Thus,  why  could  not  that 
neighbor  of  mine,  by  raising  the  price  charged  for 
the  use  of  his  house  and  lot  to  $500  a  year,  obtain  a 
gross  income  of  $375  from  the  property,  instead  of 
$275,  after  payment  of  the  tax  of  $125?  Were  he 
thus  to  increase  the  charge,  and  the  tenant,  finding 
it  impossible  to  do  better  elsewhere,  should  submit 
to  the  advance,  this  v^^ould  be  conclusive  proof  that 
the  economic  rent  of  the  land  was  more  than  $125  a 
year.  It  would  show  that  the  tax  ought  to  be  $225, 
or  thereabouts,  instead  of  $125,  and  so  the  tax  asses- 
sor would  soon  raise  taxes  in  the  same  proportion  on 
all  lands  in  that  immediate  vicinity.  Hence  the  gov- 
ernment, and  not  the  landlords,  would  ultimately  get 
the  benefit  of  any  crowding  up  of  rents. 

But  this  suggests  another  question :  If  landlords 
had  nothing  to  gain  by  it,  why  would  rents  advance 
at  all?  And  why  would  not  the  people  at  large  be 
deprived  of  much  of  the  benefit  which  ought  to 
accrue  to  them  from  increase  in  the  value  of  the  use 
of  land?  The  answer  is,  that  competition  among 
tenants,  and  the  fact  that  a  landlord  here  and  there 
could  always  secure  a  temporary  advantage  by 
advancing  rents,  would  cause  rents  to  increase  gen- 
erally as  the  value  of  land  increased.  Landlords 
would  simply  be  compelled  to  collect  all  the  ground 


208  The  Problem  of  the  Unemployed 

rent  possible.  Whenever,  for  instance,  on  account  of 
increase  in  the  demand  for  dwelling  house  improve- 
ments, tenants  in  any  locality  could  be  forced  to  pay 
more,  some  vigilant  landlord  would  require  his  own 
tenants  to  do  so,  for  it  would  always  be  to  his  indi- 
vidual interest  to  increase  the  gross  income  of  his 
property.  His  example  would  soon  be  followed  by 
others,  and  then  by  all,  and  thus  a  higher  level  oi 
economic  rent  in  that  vicinity  would  be  established, 
and  taxes  would  be  advanced  accordingly. 

Tax  assessors,  however,  would  not  be  compelled  to 
rely  wholly  upon  data  obtained  from  rented  property 
in  ascertaining  the  economic  rent  of  land.  Improved 
real  estate  then,  as  now,  would  be  constantly  chang- 
ing hands,  and  the  prices  paid  for  it,  as  already 
shown,  would  furnish  indisputable  evidence  of  true 
economic  rental  values. 

The  economy  and  absolute  impartiality  with  which 
public  revenues  could  then  be  collected,  as  compared 
with  the  present  wasteful  and  demoralizing  methods, 
also  present  a  strong  reason  for  favoring  the  system 
suggested. 

All  who  are  familiar  with  the  subject  must  admit 
that  if  land  were  in  effect  nationalized,  and  the  right 
of  the  people  to  its  beneficial  ownership  established 
by  law,  no  practical  difficulty  would  stand  in  the  way 
of  the  State  appropriating  economic  rent  with  the 
present  machinery  of  taxation.  The  question,  how- 
ever, which  always  tends  to  divert  attention  in  this 
connection  is,  how  can  land  be  in  effect  nationalized  ? 
What  reasonable  hope  can  the  political  economist 
have  that  land  owners  will  ever  consent  to  relin- 
quish the  privileges  which  the  mere  ownership  of 
land  confers,  or  that  any  method  by  which  the  gov- 


The  Ultimate  Remedy  209 

ernment  can  condemn  the  land  and  buy  out  the 
landlords  will  ever  meet  with  popular  approval? 
But  this  is  a  question  which  the  political  economist 
should  not  be  required  to  answer.  For  his  functions 
do  not  include  those  of  the  statesman.  As  a  philos- 
opher he  points  out  the  conflict  between  the  human 
law  and  the  natural  law,  and  shows  what  change  in 
the  human  law  is  necessary  to  make  it  conform  to 
the  natural  law;  while  the  statesman,  as  a  politician, 
considers  how  the  change  can  be  accomplished.  If 
the  political  economist  has  diagnosed  the  disease 
correctly,  and  prescribed  the  proper  remedy,  some 
time,  and  in  some  way,  statesmen  will  finally  secure 
the  adoption  of  the  remedy. 


CHAPTER  XV. 
IMMEDIATE    NATIONALIZATION    OF    LAND. 

WITH   COMPENSATION   TO  LAND  OWNERS.* 

POLITICAL  economists  are  asked  to  tell  why  it  is 
that  inventions  do  not  increase  wages,  and  why- 
men  want  for  work  in  the  midst  of  abundant  unused 
natural  opportunities  for  work.  Those  of  the  new 
school  say  it  is  simply  because  individuals  instead 
of  the  government  appropriate  rent.  If  this  answer 
is  true,  it  follows  that  if  the  government  alone 
appropriated  rent  and  distributed  it  among  the  peo- 
ple by  relieving  every  one  of  the  burden  of  direct 
and  indirect  taxation,  all  unused  land  would  be  free 
land,  involuntary  idleness  would  disappear,  and 
labor-saving  inventions  would  naturally  increase 
wages.  If  it  can  be  shown  that  this  would  in  fact 
be  the  case,  then  a  simple  cause  which  accounts  for 
the  economic  evils  referred  to  has  been  discovered, 
and  a  correct  answer  to  the  questions  propounded  in 


*It  is  not  to  be  inferred  from  what  is  contained  in  this  boolt 
that  the  writer  either  favors  or  disfavors  compensation  to  land 
owners.  The  subject  of  compensation,  as  well  as  that  of 
natural  taxation,  is  discussed  for  the  purpose  only  of  more 
clearly  showing  the  underlying  cause  of  involuntary  idleness, 
and  the  failure  of  wages  to  keep  pace  with  improvements  in 
labor-saving  processes.  Nothing  else  is  germane  to  the  purpose 
of  this  work,  as  stated  on  its  title  page.  The  details  of  a  plan 
in  accordance  with  which  land  owners  can  be  compensated  is 
suggested  tentatively  only,  as  one  method  of  bringing  about 
conditions  with  respect  to  land  tenures  which  must  ultimately 
prevail. 


Immediate  Nationalization  of  Land         211 

the  introductory  chapter  has  been  given,  whether 
it  be  practicable  to  induce  people  to  adopt  the  rem- 
edy or  not.  Hence,  for  the  purpose  alone  of  testing 
the  truth  of  the  answer,  the  effect  of  nationalizing 
land  and  collecting  economic  rent  by  taxation  is 
worthy  of  consideration,  no  matter  how  remote  the 
prospect  of  its  being  put  into  actual  operation. 

In  the  United  States,  as  everywhere  else,  land  will 
ultimately  be  in  effect  nationalized,  but  it  is  by  no 
means  certain  that  the  forebodings  of  Macaulay 
will  not  in  the  meantime  have  proven  well  founded. 
For  the  forces  of  want,  corruption  and  brutality 
engendered  by  an  acute  artificial  scarcity  of  land 
are  incompatible  with  democratic  institutions. 

In  1857  Lord  Macaulay  wrote  in  the  famous  letter 
to  H.  S.  Randall,  the  autobiographer  of  Jefferson — 
a  letter  which  President  Garfield  said  startled  him 
"like  an  alarm  bell  at  night" — as  follows: 

"I  have  long  been  convinced  that  institutions 
purely  democratic  must  sooner  or  later  destroy  lib- 
erty or  civilization,  or  both.  You  may  think  that 
your  country  enjoys  an  exemption  from  these  evils. 
I  will  frankly  own  to  you  that  I  am  of  a  very  differ- 
ent opinion.  Your  fate  I  believe  to  be  settled,  though 
it  is  deferred  by  a  physical  cause.  As  long  as  you 
have  a  boundless  extent  of  fertile  and  unoccupied 
land,  your  laboring  population  will  be  far  more  at 
ease  than  the  laboring  population  of  the  old  world, 
and  while  that  is  the  case  the  Jefferson  politics  may 
continue  to  exist  without  any  fatal  calamity.  But 
the  time  will  come  *  *  *  when  wages  will  be 
as  low  and  will  fluctuate  as  much  with  you  as  with 
us.  You  will  have  your  Manchesters  and  Birming- 
hams,  and  in  these  Manchesters  and  Birminghams 
hundreds  of  thousands  of  artisans  will   assuredly 


212  The  Problem  of  the  Unemployed 

some  time  be  out  of  work.  Then  your  institutions 
will  be  brought  to  the  test.  Distress  everywhere 
makes  the  laborer  mutinous  and  discontented,  and 
inclines  him  to  listen  to  agitators,  who  tell  him  that 
it  is  a  monstrous  iniquity  that  one  man  should  have  a 
million  while  another  cannot  get  a  full  meal.    *    *    * 

''I  have  seen  England  pass  three  or  four  times 
through  such  critical  seasons  as  I  have  described; 
through  such  seasons  the  United  States  will  have 
to  pass  in  the  course  of  the  next  century,  if  not  of 
this.  How  will  you  pass  through  them?  I  heartily 
wish  you  a  good  deliverance.  But  my  reason  and 
my  wishes  are  at  war,  and  I  cannot  help  foreboding 
the  worst.     *     *     * 

"The  day  will  come  when,  in  the  State  of  New 
York,  a  multitude  of  people,  none  of  whom  has  more 
than  half  a  breakfast  and  expects  to  have  more  than 
one-half  a  dinner,  will  choose  a  legislature.  Is  it 
possible  to  doubt  what  sort  of  legislature  will  be 
chosen?  On  one  side  is  a  statesman  teaching  pa- 
tience, respect  for  vested  rights,  strict  observance 
of  public  faith.  On  the  other  is  a  demagogue  ranting 
at  the  tyranny  of  capitalists  and  usurists,  and  ask- 
ing why  anybody  should  be  permitted  to  drink 
champagne  and  ride  in  a  carriage  while  thousands 
of  honest  folks  are  in  want  of  necessaries.  Which 
of  these  candidates  is  likely  to  be  preferred  by  a 
working-man  who  hears  his  children  cry  for  more 
bread  ? 

"I  seriously  apprehend  that  you  will,  in  some  such 
season  of  adversity  as  I  have  described,  do  things 
which  will  prevent  prosperity  from  returning.  There 
will  be,  I  fear,  spoliation.  The  spoliation  will  in- 
crease the  distress.  The  distress  will  produce  fresh 
spoliation.  There  is  nothing  to  stop  you.  Your  Con- 
stitution is  all  sail  and  no  anchor. 

"As  I  said  before,  when  a  society  has  entered  on 
this  downward  progress,  either  civilization  or  liberty 
must  perish.     Either  some  Csesar  or  Napoleon  will 


■sb. 


Immediate  Nationalization  of  Land         213 

seize  the  reins  of  government  with  a  strong  hand, 
or  your  republic  will  be  as  fearfully  plundered  and 
laid  waste  by  the  barbarians  in  the  twentieth  cen- 
tury as  the  Roman  Empire  was  in  the  fifth,  with 
the  difference  that  the  Huns  and  Vandals  who  rav- 
aged the  Roman  Empire  came  from  without,  and 
that  your  Huns  and  Vandals  will  have  been  engen- 
dered within  your  own  country  by  your  own  insti- 
tutions. 

"Thinking  thus,  of  course,  I  cannot  reckon  Jeffer- 
son among  the  benefactors  of  mankind." 

Equality  with  respect  to  the  use  of  the  bounties 
of  nature  may,  however,  be  established  without  an 
intervening  period  of  bloodshed  and  anarchy.  For 
the  sake  of  illustration  let  it  be  assumed  that  the 
nationalization  of  land  will  be  accomplished  in  the 
United  States  suddenly,  and  in  a  direct  and  straight- 
forward manner.  This  assumption  is,  perhaps,  a 
violent  one,  but  it  will  nevertheless  aid  in  showing 
that  the  questions  mentioned  in  the  first  chapter  of 
this  work  have  been  correctly  answered. 

If  the  Constitution  were  appropriately  amended, 
the  Federal  Government  could  issue  three  per  cent 
bonds,  interest  payable  annually  in  gold,  and  use 
them  in  compensating  land  and  franchise  owners 
for  the  loss  of  the  special  privilege  which  the  mere 
ownership  of  the  gifts  of  nature  now  enables  them 
to  enjoy.  These  bonds  could  be  made  exchangeable 
at  any  time  for  legal  tender  currency,  and  the  latter 
could  be  made  re-exchangeable  for  bonds  of  large 
denomination,  such  bonds  to  be  exchangeable  again 
for  currency,  and  so  on,  the  principal  of  the  bonds 
being  payable  in  gold  at  any  time  at  the  will  of  the 
government.     Tom  L.  Johnson,  when  in  Congress 


214  The  Problem  of  the  Unemployed 

during  the  panic  of  1893,  offered  a  bill  providing 
for  the  issuance  of  currency  exchangeable  for  bonds 
of  this  kind.  Reflection  will  satisfy  one  that  there 
could  be  no  undue  expansion  or  contraction  of  a 
currency  thus  based  on  interchangeable  gold  inter- 
est bearing  bonds.  For  the  volume  of  the  currency 
v^'ould  expand  and  contract  automatically  in  accord- 
ance with  the  laws  of  supply  and  demand.  The 
bonds  would  doubtless  be  worth  par  in  gold,  but 
whether  this  would  be  the  case  at  first  or  not,  such 
bonds  at  par  would  surely  provide  reasonable  com- 
pensation for  those  who  are  now  depriving  their 
fellow  men  of  the  heritage  so  clearly  intended  for 
the  equal  use  and  enjoyment  of  all. 

Taking  the  census  of  1910  as  the  basis  of  the 
calculation,  both  as  regards  wealth  and  population, 
and  it  will  be  found  that  the  government  at  that 
time  in  thus  nationalizing  land  would  have  incurred 
an  indebtedness  of  about  one  hundred  billion  dollars, 
had  land  and  franchise  owners  been  fully  and  lib- 
erally compensated.  This  would  have  meant  com- 
pensation to  them  in  full  for  the  loss  of  all  taxing 
privileges  connected  with  the  mere  ownership  of 
land.  In  this  estimate  six  billion  dollars  are  allowed 
for  the  land  and  franchise  values  alone  of  railroads 
and  all  public  utility  corporations.  It  would  there- 
fore have  required  a  revenue  of  about  $5,800,000,000 
to  meet  interest  charges  and  all  expenses  of  govern- 
ment, including  national,  state  and  municipal,  or 
$63  per  capita,  had  the  nationalization  of  land  taken 
effect  in  1910.  A  large  part  of  the  required  reve- 
nue, however,  probably  a  third  or  more,  would  from 
the  start  have  been   derived  from   economic   rent 


Immediate  Nationalization  of  Land         215 

paid  in  the  form  of  a  tax  for  the  use  of  land  which 
was  in  effect  owned  by  the  government.  It  would 
have  reduced  the  real  per  capita  taxation  to  about 
$42  a  year.  In  1910  the  per  capita  tax  in  the  United 
States  was  $29,  hence  it  would  only  have  been  nec- 
essary to  have  raised  by  real  taxation  $13  more  per 
capita  than  was  in  fact  raised  in  1910,  or  an  increase 
from  $29  per  capita  to  $42  per  capita.  And  there- 
after, as  the  revenue  from  ground  rent  increased, 
real  taxation  would  decrease. 

Taxation  amounting  only  to  $42  a  year  per  capita 
would  not  be  a  serious  burden  if  all  unused  land 
were  free  land  and  if  economic  rent  went  to  the 
government  instead  of  to  the  individual,  as  is  now 
the  case,  and  if  transportation  and  public  utility 
charges  were  limited  to  reasonable  returns  upon 
improvement  and  equipment  valuations  only.  It 
would  in  fact  be  a  mere  bagatelle  in  comparison 
with  the  enormous  increase  in  real  land  values,  in 
wealth  and  population  which  would  quickly  follow. 
A  large  part  of  the  revenue  required,  probably  a 
third  or  more,  w^ould  from  the  start  be  derived  from 
economic  rent  paid  in  the  form  of  a  tax  for  the  use  of 
land  which  was  in  effect  owned  by  the  government.* 

New  Zealand,  probably  the  richest  and  most  pros- 
perous country  in  the  world  in  proportion  to  pop- 
ulation, collects  a  revenue  of  $36  per  capita,  only 
$11  of  which  comes  from  her  government  owned 
railways,  leaving  about  $25  per  capita  raised  by 
real  taxation.    The  American  people  are  now  spend- 

*In  the  year  1910  :52, 799,497,705  was  spent  in  the  United  States 
for  the  support  of  government.  Taxation  in  America  amount- 
ing to  but  $42  per  capita  will  bo  small,  indeed,  compared  with 
the  per  capita  taxation  in  Europe  when  the  present  war  ia  over. 


216  The  Problem  of  the  Unemployed 

ing  $15  per  capita  annually  for  alcoholic  liquors. 
They  surely  could  stand  additional  taxation  to  the 
extent  of  $14  per  annum  per  capita  in  order  to 
accomplish  the  nationalization  of  land. 

It  is  true  that  much  of  the  nearby  unused  oppor- 
tunities for  employment  now  held  for  speculation 
and  mere  investment  purposes,  v/hose  owners  would 
have  received  immense  sums  in  the  process  of 
nationalization,  would  yield  no  revenue  at  first.  But 
just  as  people  rushed  to  the  wilderness  of  Oklahoma 
for  free  land,  so  would  capital  and  labor  rush  for 
the  valuable  vacant  lots  and  lands  and  unused  coal 
beds  and  mineral  deposits  to  be  found  at  present  on 
every  hand.  Within  two  or  three  years,  probably, 
all  valuable  land  of  this  character,  most  of  which 
is  now  situated  in  and  near  cities  and  towns,  and 
in  well  settled  farming  communities,  would  be  used 
and  occupied.  This  increasing  use  of  valuable  lands 
now  unused  would  rapidly  swell  the  public  revenues. 
The  income  from  ground  rent  taxation  would  shortly 
equal  and  then  vastly  exceed  the  interest  on  the 
bonds  issued  to  land  owners.  Capital  could  only  be 
profitably  invested  then  in  wealth-producing  enter- 
prises— enterprises  which  would  give  employment 
to  labor  and  add  to  the  world's  stock  of  wealth.  None 
of  it  could  be  invested  in  the  unused  bounties  of 
nature  for  the  purpose  of  blackmailing  Effort.  All 
the  obstacles  to  employment  and  to  the  most  effect- 
ive use  of  land,  to  which  attention  has  been  called, 
would  be  swept  away.  An  era  of  business  pros- 
perity would  be  inaugurated,  nor  could  it  be  checked 
and  throttled  by  a  panic-breeding  increase  in  the 
price  of  unused  land.     Population  would  multiply. 


Immediate  Nationalization  of  Lana         217 

and  wealth  would  accumulate  with  unprecedented 
rapidity.  While  interest  on  the  public  debt  incurred 
in  buying  out  landlords  would  remain  a  fixed  charge, 
the  revenues  of  the  government  would  constantly 
increase  with  the  increase  in  the  value  of  land.  Is 
it  not  reasonable  to  suppose,  under  free  land  condi- 
tions which  would  then  prevail,  that  in  ten  or  fifteen 
or  at  most  twenty  years  the  indebtedness  incurred 
in  depriving  land  and  franchise  owners  of  the  right 
of  extorting  tribute  money  from  their  fellow  men 
would  have  been  paid,  and  the  heritage  of  the  people 
relieved  from  all  encumbrances? 

By  free  land  conditions,  as  used  above,  is  meant 
conditions  under  which  individuals  would  hold  land 
on  payment  to  the  government  of  the  economic  rent 
of  it  and  nothing  more  or  less.  Unused  land  would 
then  be  free  land,  and  no  land  could  be  profitably 
withheld  from  the  use  to  which  it  was  best  adapted. 
To  attain  such  conditions,  it  would  be  necessary  to 
abolish  taxation  of  personal  property  and  improve- 
ments on  lands,  since  such  taxes  obstruct  the  free 
use  of  land — the  source  of  all  employment — and  are 
in  eflfect  fines  upon  industry  and  enterprise.  While 
all  real  taxation  inevitably  has  this  effect  in  greater 
or  less  degree,  and  the  burden  of  it  in  the  end  is 
borne  by  consumers  and  users,  nevertheless  the 
exemptions  referred  to  would  minimize  the  tendency 
of  such  taxation  to  obstruct  enterprise  and  discour- 
age the  employment  of  labor. 

The  question  as  to  how  it  would  have  been  possi- 
ble to  have  obtained  a  revenue  of  $5,800,000,000  in 
1910,  and  especially  so  if  at  the  same  time  improve- 
ments on  land  and  personal  property  were  exempted 
from  taxation,  and  the  land  value  tax  limited  to 


218  The  Problem  of  the  Unemployed 

economic  rent  only,  will  be  briefly  considered.  The 
required  revenue  could  have  been  easily  raised  by  a 
budget  made  up  somewhat  as  follows : 

Ground  rent  taxation,  not  in  excess  of  economic 
rent  estimated  to  amount  at  first  to  only  one- 
third  of  total  revenue $1,950,000,000 

Customs,  double  the  amount  collected  in  1910...      750,000,000 

Internal  revenue  on  liquor  and  tobacco 1,000,000,000 

General  stamp  tax 300,000,000 

Ad  valorem  tax  on  railway  freight  and  passenger 
rates,   collected   by   stamps   applied   to  tickets 

and  bills  of  lading  to  extent  of  40  per  cent 1,000,000,000 

Inheritance  tax    400,000,000 

Increase  postal  rates   50,000,000 

Licenses,  occupation  taxes  and  miscellaneous....      350,000,000 

Total    $5,800,000,000 

Taxes  levied  as  above  could  be  collected  by  a  single 
set  of  Federal  tax  gatherers  at  less  expense  and  with 
less  partiality  than  is  possible  under  the  present 
complicated  and  cumbrous  system.  After  deducting 
the  amount  needed  for  the  general  government,  the 
remainder  could  be  apportioned  among  the  several 
States,  according  to  some  equitable  method  of  dis- 
tribution. Each  State  government  could  then,  after 
making  a  similar  deduction,  distribute  what  was  left 
among  its  counties,  cities  and  towns  according  to 
population  or  otherwise.  The  principle  of  local  self- 
government  would  not  be  impaired.  Every  political 
subdivision  would  retain  the  right  to  spend  as  it  saw 
fit  the  portion  of  the  public  revenue  to  which  it  was 
entitled.  The  ultimate  end  being  the  abolition  of  all 
taxation,  it  would  be  consistent  and  probably  expe- 
dient for  the  general  government  to  collect  the  rev- 
enue from  the  ground  rent  tax,  since  the  people 
collectively  create  the  values  which  such  a  tax  appro- 
priates.   People  living  in  New  York,  for  instance,  do 


Immediate  Nationalization  of  Land         219 

little  more  to  produce  its  land  values  than  people 
living  in  Iowa,  whose  products  may  be  exchanged 
in  that  city  for  the  products  of  people  living  in 
Maine. 

In  the  estimate  given  above,  it  is  assumed  that 
the  land  value  tax  on  improved  lands  in  and  near 
cities  and  towns,  on  mines,  railroads  and  public  util- 
ities, which  ought  in  no  case  to  exceed  the  economic 
rent,  would  yield  at  first  only  $1,950,000,000,  or  one- 
third  of  the  amount  necessary  to  pay  interest  on  the 
bonds  issued  to  land  owners.  It  is  assumed  in  this 
connection  that  the  economic  rent  of  all  improved 
lands  would  fall  at  least  50  per  cent ;  also,  that  land 
whose  ow-ners  would  have  received  $25,000,000,000, 
or  one-fourth  of  the  $100,000,000,000  of  bonds 
issued,  would  yield  at  first  no  economic  rent  to  the 
government,  most  of  the  unimproved  land  and  much 
of  the  land  in  cultivation  being  embraced  in  this 
class.  So  also  as  to  the  243,000  miles  of  railroads  in 
the  United  States  in  1910.  The  par  value  of  railroad 
stocks  and  bonds  amounted  to  $17,942,282,515,  an 
average  of  $73,000  per  mile.  It  is  assumed  that 
one-third  of  this  sum  represented  the  value  of  land, 
including  terminals,  rights-of-way  and  franchise 
holdings,  and  the  other  two-thirds  improvement 
values.  The  gross  receipts  of  railroads  in  1910  were 
$2,500,000,000 ;  the  net  earnings  amounted  to  $852,- 
153,280.  It  is  estimated  that  $6,000,000,000,  or 
one-third  the  par  value  of  the  stocks  and  bonds, 
would  have  been  used  in  paying  railroads  for  relin- 
quishing land  and  franchise  values  and  the  water 
in  stocks  and  bonds.  It  follows,  however,  that  the 
elimination  of  these  factors  in  fixing  rates  would 
have  resulted  in  reducing  rates  to  the  extent  of,  say, 


220  The  Problem  of  the  Unemvloyed 

5  per  cent  on  the  $6,000,000,000,  or  $300,000,000 
annually.  Hence  a  stamp  tax  of  40  per  cent  ad 
valorem  paid  by  shippers  and  passengers  on  railroad 
charges  as  thus  reduced  would  have  amounted  in 
fact  to  only  a  31  per  cent,  instead  of  a  40  per  cent, 
increase  in  rates,  and  would  have  added  over  $1,000,- 
000,000  to  the  revenue  of  the  government.  The  bur- 
den of  the  additional  $2,000,000,000,  or  thereabouts, 
of  real  taxation  collected  in  the  manner  thus  sug- 
gested would  have  been  collected  at  a  minimum  of 
expense  and  borne  by  all  consumers  in  proportion  to 
the  amount  consumed  by  each.* 

An  important  factor  to  be  taken  into  account  in 
considering  the  feasibility  of  compensating  land 
owners  in  full  is  the  difference  between  the  govern- 
ment rate  of  3  per  cent  interest  and  the  rate  of  4  per 
cent  to  8  per  cent  now  paid  by  individuals  and  cor- 
porations. Thus,  the  land  which  furnishes  the  site 
for  the  office  building  mentioned  in  the  preceding 
chapter  is  worth  $160,000,  the  economic  rent  of  it 
being  $8,000  per  year,  or  5  per  cent  of  its  value. 
The  government,  however,  would  have  obtained  the 
land  owner's  taxing  privilege  pertaining  to  this  lot 
for  $160,000,  paying  for  it  in  3  per  cent  gold  interest 
bearing  bonds,  the  interest  on  which  would  amount 
to  only  $4,800  annually.  Thereafter  the  full  eco- 
nomic rent  as  determined  by  the  rate  of  interest 

*At  first  the  income  of  the  government  from  ground  rent 
taxation  would  be  abnormally  low,  owing  to  the  immense 
amount  of  near-at-hand  unused  land  which  would  become  at 
once  available  to  capital  and  labor;  but  within  a  very  short 
period  these  lands  would  all  be  occupied,  and  then  the  ground 
rent  fund  would  rise  to  normal  figures.  Hence  no  harm  would 
result  if  during  this  period  of  transition  it  became  necessary 
for  the  government  to  issue  additional  bonds  to  provide  for 
deficits. 


Immediate  Nationalization  of  Land         221 

prevailing  among  individuals  in  that  locality  would 
be  paid  the  government  in  the  form  of  a  tax  on  this 
tract  of  land.  It  might  soon  amount  to  $6,000  or 
$8,000  a  j-ear ;  hence,  in  many  instances  the  revenues 
from  valuable  lands  would  soon  from  this  cause 
alone  more  than  equal  the  interest  on  the  bonds  given 
in  exchange  for  them.  This  would  quickly  offset  the 
shrinkage  in  economic  rent  resulting  at  first  from 
the  opening  up  to  capital  and  labor  of  all  nearby 
valuable  unused  land.  It  would  perhaps  enable  the 
government  to  retire  the  bonds  referred  to  without 
perceptible  increase  of  the  burden  of  real  taxation. 
Again,  the  fact  of  these  gold  interest  bearing 
bonds  being  exchangeable  for  currency,  (the  cur- 
rency being  also  re-exchangeable  for  gold  interest 
bearing  bonds  of  large  denominations)  would  pro- 
duce an  artificial  stimulation  of  business  like  an 
inflation  of  the  currency,  which  would  also  aid  in 
tiding  over  the  first  few  years  of  increased  taxation. 
But  this  could  produce  no  disastrous  inflation  of 
values.  The  price  of  land  and  of  stocks,  bonds  and 
securities  based  on  lands  and  franchises  could  not 
be  advanced,  since  all  increase  in  these  values  would 
be  appropriated  by  the  government;  a  rising  real 
estate  market,  therefore,  the  cause  as  well  as  the 
premonitory  sign  of  every  panic  in  the  past,  would 
be  lacking.  The  stimulus  to  business  could  show 
itself  only  in  an  enormous  demand  for  labor  to  be 
applied  to  the  development  of  valuable  near-at-hand 
unused  building  lots  and  farming  lands,  coal  beds 
and  mineral  deposits,  the  use  of  which  would  then 
be  secured  without  encountering  the  obstacle  which 
the  purchase  price  of  land  at  present  always  inter- 
poses. 


222  The  Problem  of  the  Unemployed 

At  this  point  a  question  of  morals  again  arises. 
Thus,  if  land  belongs  by  natural  right  to  all,  if  the 
value  which  attaches  to  it  is  the  product  of  the 
common  energy  and  enterprise  of  all,  what  right 
has  the  government  to  compel  the  people  to  pay  for 
what  they  already  own?  If  compensation  is  to  be 
awarded  at  all,  why  should  it  not  be  given  to  those 
who  have  been  deprived  of  the  heritage  rather  than 
to  those  who  have  enjoyed  its  exclusive  use  and 
possession  ?  In  point  of  fact,  however,  the  political 
economist,  for  reasons  already  given,  has  nothing  to 
do  with  the  question  thus  suggested.  He  sees  that 
the  natural  law  demands  equality  with  respect  to 
the  use  of  the  bounties  of  nature ;  that  the  violation 
of  this  law  produces  confusion  and  waste,  and  that 
harmony  with  it  can  only  be  effected  by  requiring 
those  who  possess  land  to  pay,  for  the  benefit  of  all, 
what  the  use  of  it  is  worth.  In  other  words,  that 
harmony  with  the  natural  law  can  be  reached  only 
by  what  is  in  effect  the  nationalization  of  land. 
When  it  is  proposed  to  compensate  land  owners,  the 
economist  must  test  the  matter,  not  by  trying  to 
determine  the  right  or  wrong  of  it,  but  by  consid- 
ering how  it  would  affect  the  demand  for  labor  and 
the  distribution  of  wealth.  Applying  this  test,  the 
conclusion  is  reached  that  the  government  could  well 
afford  to  pay  the  owners  of  land  in  full  for  all  the 
privileges  which  its  nationalization  would  force  them 
to  relinquish.  For  it  is  evident  that  the  payment  of 
the  fixed  amount  of  indebtedness  incurred  in  doing 
so,  bearing  the  low  rate  of  interest  at  which  the 
government  can  float  its  bonds  at  par,  would  be  far 
less  burdensome  upon  capital  and  labor  than  the 
continuance  of  the  present  system  of  constantly  in- 


hnmediate  Nationalization  of  Land         223 

creasing  exactions  on  the  part  of  land  and  franchise 
owners.  And  especially  so,  if  free  land  conditions 
from  the  very  start  could  thus  be  obtained. 

The  British  Government  is  now  engaged  upon  a 
huge  scale  in  buying  out  great  estates  in  Ireland  and 
establishing  tenants  upon  small  farms  of  their  own. 
The  Act  of  1902  appropriated  $800,000,000  for  this 
purpose.  The  government  charges  2%  per  cent 
interest  with  1/2  P^r  cent  added  as  a  sinking  fund. 
At  this  rate  the  tenant  acquires  absolute  ownership 
of  his  farm  in  sixty-eight  and  one-half  years.  In 
Hugh  Southerland's  "Ireland,  Yesterday  and  Today," 
it  is  stated  that  out  of  the  70,000  purchasers  under 
acts  of  Parliament  previous  to  that  of  1902,  only 
two  purchasers  failed  to  meet  their  payments,  and 
that  up  to  the  time  the  book  was  written,  in  1909, 
a  total  of  over  215,000  tenants  had  purchased  their 
holdings. 

The  land  question,  however,  is  not  solved  by  a 
mere  multiplicity  of  land  owners.  The  natural  law 
demands  that  all  who  enjoy  the  legal  right  to  the 
exclusive  possession  of  any  tract  of  land  shall  pay 
into  the  common  treasury,  for  the  benefit  of  all,  what 
such  right  of  exclusive  possession  is  annually  worth. 
Hence  government  land  purchasing  acts  should  not 
require  the  repayment  to  the  government  of  money 
paid  landlords,  but  the  land  so  purchased  should  be 
held  subject  forever  to  the  payment  of  a  land  value 
tax  equal  to  the  annual  economic  rental  value  of  the 
land.  In  no  other  way  can  justice  be  meted  out,  and 
the  evils  flowing  from  private  ownership  of  the  gifts 
of  nature  be  wholly  avoided. 

The  success  of  the  government  in  its  treatment  of 
farm  tenantry  in  Ireland,  imperfect  and  incomplete 


224  The  Problem  of  the  Unemj^loyed 

as  the  method  pursued  may  be,  suggests  a  plan  by 
which  the  nationalization  of  all  land  could  be  grad- 
ually effected.  The  government  could  create  boards 
of  commissioners,  as  in  Ireland,  and  give  them  power 
not  only  to  condemn  unused  and  but  partially  used 
land  and  fix  the  price  to  be  paid  for  it,  but  also  to 
fix  its  annual  economic  rental  value  at  the  time  of 
condemnation,  such  rent  to  be  paid  annually  in  the 
form  of  a  special  tax  on  the  land  condemned.  The 
actions  of  these  boards  could  be  invoked,  under 
proper  limitations,  by  anj?^  individual  or  corporation 
desiring  and  able  to  use  the  land  sought  to  be  con- 
demned for  any  wealth-producing  and  labor-employ- 
ing purpose  for  which  it  was  adapted,  be  it  for  a 
mercantile,  manufacturing,  agricultural  or  residence 
purpose. 

In  the  State  of  Texas  there  are  over  150,000,000 
acres  of  arable  land,  less  than  20,000,000  acres  being 
in  cultivation.  More  than  50  per  cent  of  the  actual 
farmers  of  the  State  are  tenants.  The  unused  and 
fertile  lands  of  Texas,  moderately  well  located  with 
respect  to  railroads  and  markets,  are  held  at  $20 
an  acre  and  upwards.  Under  laws  of  the  character 
suggested  any  one  with  capital  sufficient  to  enable 
him  to  improve  and  cultivate,  say,  100  acres,  would 
be  saved  an  investment  of  $2,000  or  more  in  land. 
The  economic  rent  on  such  a  tract  of  land  would 
hardly  exceed  $30  a  year.  In  place  of  $160  a  year, 
the  interest  at  prevailing  rates  on  the  purchase 
money  value,  the  party  in  whose  favor  the  unused 
land  was  condemned  would  only  pay  $30  a  year  to 
begin  with  in  the  form  of  a  land  value  tax. 

Imagine  what  an  era  of  brisk  business  and  uni- 
versal prosperity  for  all  classes  would  instantly  be 


Immediate  Nationalization  of  Land         225 

inaugurated  if  any  unused  piece  of  land  in  Texas 
could  thus  be  made  available  for  a  home  or  for  any 
labor-employing  enterprise  without  the  investment 
by  the  individual  making  use  of  it  of  the  enormous 
sum  now  required  to  be  paid  for  the  bare  privilege 
of  employing  labor  on  a  gift  of  nature. 

The  great  increase  of  wealth  resulting  from  the 
slight  progress  toward  the  nationalization  of  land 
effected  in  Ireland  by  the  land  purchase  acts  is  strik- 
ingly shown  by  Mr.  Southerland  from  comparing 
present  conditions  of  certain  sections  of  Ireland, 
v,'here  the  act  has  been  applied  to  large  estates,  with 
conditions  existing  in  the  same  neighborhood  seven 
years  before  its  application,  thus  proving  conclu- 
sively that  government  indebtedness  incurred  in  buy- 
ing out  landlords  would  be  easily  liquidated  by  the 
increase  of  wealth  resulting  therefrom. 


CHAPTER  XVI. 
THE  NATIONALIZATION  OF  LAND,  Continued 

SPECULATIONS  IN  REGARD  TO  EFFECTS  WHICH  WOULD 

FLOW  FROM  IT,  INCLUDING  ITS  EFFECT  ON 

LABOR  UNIONS,  TRUSTS  AND 

SOCIALISM. 

WHILE  the  nationalization  of  land,  brought 
about  at  once,  and  without  hardship  or  exces- 
sive loss  to  any  individual,  may  be  but  an  "iridescent 
dream,"  further  speculation  in  regard  to  it  and  to 
the  effects  which  would  flow  from  it  are  nevertheless 
interesting  and  instructive.  For  in  this  way  the 
maladjustment  of  the  forces  of  government  in  the 
particular  to  which  attention  has  been  called  can 
be  made  even  more  clearly  apparent.  The  fact  that 
the  subject  may  be  at  present  without  practical 
interest  to  politicians  and  statesmen  does  not  render 
it  of  less  importance  to  the  political  economist.  Nor 
is  interest  in  the  matter  from  his  point  of  view 
diminished  because  people  at  present  have  neither 
the  intelligence  nor  the  patriotism  which  the  remedy 
calls  for.  As  a  scientist,  he  considers  the  subject 
simply  for  the  purpose  of  ascertaining  whether  the 
cause  of  increasing  poverty  in  the  midst  of  increas- 
ing wealth  has  been  discovered,  and  if  so,  whether 
the  ultimate  remedy  is  to  be  found  in  socialism  or 
in  individualism,  in  tyranny  or  in  freedom. 


The  Nationalization  of  Land  227 

Let  us  then  try  to  imagine  what  would  have  hap- 
pened had  the  landlords  of  the  United  States  been 
compelled,  on  the  terms  stated,  to  relinquish,  in  1910, 
in  favor  of  the  government,  all  the  taxing  privileges 
previously  enjoyed  by  them  as  mere  owners  of  land. 
The  land  value  tax  for  the  first  year  on  every  tract 
of  land  would  of  course  have  equaled  the  interest  on 
the  bonds  awarded  its  owner.  If,  for  instance,  a 
farmer's  tax  was  sixty  dollars,  he  would  have 
received  two  thousand  dollars  in  bonds,  on  which 
the  interest  in  gold  would  have  been  sixty  dollars. 
With  this  he  could  pay  all  his  direct  taxes,  for  there 
would  then  be  no  tax  on  personalty  or  improvements 
on  land.  The  year  before,  this  farmer  would  have 
paid  the  tax  on  his  farm  and  personal  property  out 
of  money  which  he  earned ;  the  year  after  the  change 
was  made,  he  would  pay  it  with  money  furnished 
by  the  government  in  the  form  of  interest  on  the 
bonds  awarded  him ;  yet  he  would  be  in  no  way  de- 
prived of  the  use  and  enjoyment  of  his  farm.  This 
would  be  the  case  at  first  as  to  every  land  owner. 
All  would  still  have  the  exclusive  use  of  the  land 
owned  by  them,  and  all  would  at  first  in  effect  be 
relieved  entirely  of  the  burden  of  taxation  in  con- 
nection with  it.  For  the  money  with  which  to  pay 
the  taxes  assessed  against  land  would,  for  the  first 
year  at  least,  as  stated,  be  furnished  by  the  govern- 
ment. Taxes  levied  against  owners  of  improved 
real  estate,  therefore,  on  the  start  w^ould  be  de- 
creased, and  the  burden  of  direct  taxation  as  to  them 
would  at  first  be  lessened.  This  condition,  however, 
as  to  all  highly  valuable  lands,  would  only  be  tem- 
porary, but  as  to  cheap  lands  it  would  be  more  or 
less  permanent,  and  would  continue  for  many  years 


228  The  Problem  of  the  Unemployed 

following  the  change.  Probably  half  or  more  of  the 
land-owning  farmers  of  this  country  would  pay  no 
direct  taxes  on  the  lands  used  by  them,  because  such 
lands  would  not,  for  many  years  after  the  new  sys- 
tem went  into  effect,  have  any  real  economic  value. 

Since  improvements  existing  at  the  time  the 
nationalization  of  land  became  effective  would  stand 
as  security  for  the  payment  of  taxes,  it  would  be  to 
the  interest  of  all  owning  fairly  well  improved  lands 
to  pay  the  tax  assessed  against  them  rather  than 
permit  such  lands  to  be  sold  for  non-payment.*  As 
to  unimproved  lands,  however,  the  case  would  be 
different.  Unless  the  owner  of  an  unimproved  tract 
intended  to  utilize  it  himself  without  delay,  there 
would  be  no  inducement  for  him  to  pay  taxes  on  it. 
If,  therefore,  he  could  not  sell  his  title  for  a  small 
premium  to  one  who  wished  to  use  the  land  at  once, 
he  would  let  it  revert  to  the  government.  Thus, 
suppose  A  owned  a  vacant  lot  formerly  valued  at  a 
thousand  dollars,  on  which  he  had  received  a  thou- 
sand dollars  in  3  per  cent  gold  interest  bearing 
bonds,  and  that  he  was  unable  or  unv/illing  to  im- 
prove this  property  himself.  He  would  have  noth- 
ing to  gain  by  paying  the  $30  which  it  would  cost  to 
hold  the  land  in  idleness  the  first  year.  Suppose  he 
paid  the  tax,  however,  with  the  intention  of  making 
some  one,  some  time,  give  him  a  premium  of  a  hun- 
dred or  two  hundred  dollars  or  more  for  the  land. 
It  would  be  impossible  for  him  to  succeed  in  such 
a  scheme  unless  others  with  unused  tracts  of  land  in 


*The  plan  proposed  by  Mr.  Shearman,  supra,  201-203,  under 
which  land  owners  would  be  saved  the  loss  of  improvements  in 
case  of  tax  sales,  could  not  be  applied  until  sufficient  time  had 
elapsed  for  a  complete  readjustment  of  rental  values. 


The  Nationalization  of  Land  229 

the  same  locality  also  held  on  to  them  for  the  same 
purpose.  If  this  were  done,  it  would  be  conclusive 
evidence  that  the  economic  rent  of  the  land  was 
more  than  $30  a  year ;  hence  the  tax  would  be  raised, 
and  it  would  cost,  say,  $40  or  $50  to  hold  the  land 
in  idleness  the  next  year.  And  so  the  tax  would  be 
increased  year  by  year  if  need  be,  and  the  govern- 
ment, and  not  the  individual,  would  appropriate  the 
unearned  increment.  The  knowledge  that  the  gov- 
ernment possessed  this  power,  and  that  it  would  be 
its  interest  and  its  duty  to  advance  the  tax  on  vacant 
as  well  as  improved  lands  until  all  economic  rent 
collectible  was  appropriated  by  taxation  for  the  ben- 
efit of  the  people  at  large,  would  effectually  deter 
any  one  from  acting  "the  dog  in  the  manger"  by 
trying  to  hold  land  in  idleness  for  investment  or 
speculative  purposes. 

It  follows,  then,  that  every  vacant  city  lot,  all  the 
millions  of  acres  in  the  aggregate  of  unimproved 
lands  within  the  zones  of  vacant  land  surrounding 
cities,  towns  and  villages,  to  which  attention  has 
been  called,  and  the  hundreds  of  millions  of  acres  of 
unused  farming  lands  in  the  midst  of  well  settled 
farming  communities,  as  well  as  the  tens  of  thou- 
sands of  acres  of  unused  coal  beds  and  mineral 
deposits  within  convenient  distances  of  great  cen- 
ters of  population,  and  unused  land  everywhere, 
would  be  thrown  open  to  use  and  settlement  on  terms 
requiring  practically  no  investment  of  purchase 
money.  The  fact  that  here  and  there  an  owner 
might  be  able  to  exact  a  small  premium  for  the  mere 
privilege  of  immediate  possession  would  not  affect 
the  general  rule  that  capital  could  no  longer  be  sunk 
in  buying  land. 


230  The  Problem  of  the  Unemployed 

A  few  illustrations  will  bring  home  to  the  reader 
the  momentous  effects  of  the  change  outlined  above. 
Thus,  the  clerk  or  mechanic,  for  instance,  who  for- 
merly would  have  been  compelled  to  surrender  $1,000 
of  capital  in  buying  a  conveniently  located  vacant 
lot,  on  which  to  build  his  home,  would  now  obtain  a 
secure  title  to  it  with  an  initial  outlay  of  but  the  first 
year's  tax  of  $30.  The  five-acre  tract  of  unimproved 
land  in  the  suburbs  of  a  city,  really  useful  only  for 
market  garden  purposes,  which  v/ould  formerly  have 
cost  $5,000,  the  gardener  would  now  get  with  an 
initial  investment  of  but  $150,  and  this  assessment 
might  settle  to  even  lower  figures  within  a  year  or 
two.  So,  also,  the  tenant  farmer  and  the  sons  of 
small  land-owning  farmers  would  obtain  conven- 
iently sized  farms  on  similar  terms,  not  in  remote 
wildernesses,  but  on  the  unused  or  but  partially  used 
lands  to  be  found  in  the  very  neighborhoods  in  which 
they  were  living.  They  would  thus  have  the  advan- 
tages at  once  of  schools,  churches,  good  roads  and 
nearby  markets,  and  all  the  comforts  and  interests 
in  life  which  highly  civilized  society  affords.  As 
already  shown,  a  given  amount  of  effort  applied  to 
such  lands  will  often  produce  quadruple  the  wealth 
which  it  can  bring  forth  on  cheaper  lands  at  greater 
distances  from  centers  of  population. 

Again,  the  manufacturer  looking  for  a  site  for  a 
new  factory  would  no  longer  be  forced  to  pass  by 
an  unimproved  block  in  the  heart  of  the  manufac- 
turing district  of  the  city,  convenient  to  railroad  and 
wharf,  to  schools  and  comfortable  sanitary  dwell- 
ings for  employees,  and  locate  his  enterprise  in  a 
distant  suburb,  remote  from  such  advantages.  No 
"dog  in  the  manger,"  by  demanding  a  more  or  less 


The  Nationalization  of  Land  231 

exorbitant  price,  could  prevent  the  employer  from 
taking  up  the  unused  land  most  suitable  for  his  pur- 
pose. He  would  alwaj'^s,  therefore,  be  able  to  select 
the  tract  of  unused  or  but  partially  used  land  on 
Avhich  the  greatest  amount  of  wealth  could  be  pro- 
duced with  the  least  expenditure  of  labor. 

Nor  would  the  employer  be  compelled  to  take  the 
chances  of  a  land  speculator  in  connection  with  a 
labor-employing  enterprise.  If  his  ground  rent  tax 
increased,  it  would  be  because  his  land  was  becom- 
ing more  valuable  and  he  could  therefore  afford  to 
pay  the  additional  rate ;  if  the  land  decreased  in 
value,  his  tax  would  decrease  accordingly ;  for,  under 
no  circumstances,  after  the  system  was  fairly  inaug- 
urated, would  a  land  owner  ever  be  required  to  pay 
as  taxes  more  than  the  economic  rent  of  the  land 
which  he  owned.  And  so  it  would  be  as  to  all  farm- 
ers, merchants,  miners  and  homeseekers;  nowhere 
would  the  purchase  price  of  land,  the  greatest  of  all 
obstacles  to  employment,  stand  in  the  path  of  prog- 
ress. 

Nor  would,  for  instance,  appeals  to  philanthropy 
be  necessary  then  to  secure  the  construction  of  com- 
modious and  sanitary  tenement  houses  in  the  slums 
of  great  cities.  All  improvements  on  land  being 
exempt  from  taxation,  and  land  owners  being  no 
longer  fined  by  an  increase  of  taxation  for  improv- 
ing land,  and  sites  for  such  tenements  being  obtain- 
able on  easy  terms,  self-interest  alone  would  quickly 
bring  about  the  employment  of  labor  in  tearing  down 
unsanitary  rookeries,  and  in  the  construction  of 
comfortable  dwellings  in  place  of  them.  As  it  is 
now,  before  the  capitalist  can  build  a  model  tene- 
ment house,  he  must  pay  some  one  for  a  suitable 


232  The  Problem  of  the  Unemployed 

site  from  25  to  100  per  cent  more  than  its  present 
economic  value.  He  is  compelled  to  do  this  because 
of  the  anticipated  increase  in  value  always  to  be 
discounted  and  added  to  the  real  value  in  fixing  the 
purchase  price  of  land.  This  renders  the  invest- 
ment a  more  or  less  doubtful  one.  In  a  city  like 
New  York,  the  land  alone  on  which  to  erect  a  com- 
fortable tenement  often  costs  far  more  than  the 
building  itself;  hence,  error  of  judgment  with  re- 
spect to  this  speculative  value  may  result  in  disas- 
trous loss  instead  of  sure  and  moderate  gain.  "Busi- 
ness," instead  of  sweeping  towards  the  proposed  site 
and  doubling  and  trebling  its  value,  as  its  owner 
hopes  will  be  the  case,  may  go  in  another  direction. 
At  present,  such  investments  at  best  partake  in  large 
part  of  the  nature  of  a  lottery.  It  is  sometimes  more 
of  a  land  speculating  scheme  than  a  wealth-produc- 
ing and  labor-employing  enterprise.  For  every  dol- 
lar invested  in  it  in  the  payment  of  the  products  of 
labor,  several  times  as  much  more  must  often  be 
invested  in  the  purchase  of  privilege.  Under  the 
conditions  which  would  then  prevail,  however,  not 
only  would  the  land  speculator's  risk  be  eliminated, 
but  this  particular  form  of  investment,  as  well  as  all 
others  calling  for  the  employment  of  labor,  could 
be  made  with  a  much  smaller  amount  of  capital  than 
is  now  possible.  This  of  itself  would  largely  facili- 
tate the  employment  of  labor,  and  increase  the  de- 
mand for  laborers. 

So  also  as  to  the  settlement  of  land  in  cities  and 
towns  generally.  Vacant  lots,  to  be  found  every- 
where at  present  in  the  midst  of  improved  premises, 
would  soon  disappear.  Population,  in  obedience  to 
natural  law,  would  be  attracted  to  the  unused  sites 


The  Nationalization  of  Land  233 

for  homes  and  business  purposes  nearest  at  hand 
rather  than  to  those  among  wildernesses  of  vacant 
lots  in  the  suburbs.  Nothing  would  then  interfere 
v.-ith  the  natural  tendency  to  use  all  land  for  some 
purpose,  and  to  devote  each  particular  parcel  of  it  to 
the  purpose  for  which  it  was  best  adapted,  be  it  for 
a  business  block,  a  factory,  a  dwelling  house,  a  farm, 
a  sheep  walk,  or  a  cattle  ranch.  Hence  unnecessary 
congestion  of  population  in  the  slums  of  cities,  and 
its  unnecessary  diffusion  in  the  suburbs  and  rural 
districts,  would  be  avoided.  Highly  improved  roads, 
sidewalks  and  sewers,  electric  light,  heat  and  power 
service,  and  all  public  utilities  now  impossible  of 
enjoyment  except  in  a  limited  degree  by  a  limited 
number,  would  then  be  possible  of  enjoyment  in  the 
highest  degree  by  the  greatest  number;  and  the 
expense  would  be  trifling  in  comparison  with  what 
so  wide  a  diffusion  of  these  public  utility  privileges 
would  cost  under  present  conditions.  This  would  be 
brought  about  by  the  natural  and  common  sense 
manner  of  using  land  which  the  appropriation  of  eco- 
nomic rent  by  taxation  would  induce. 

The  plan  pursued  in  regulating  the  use  of  coal 
l;eds  and  mineral  deposits  would  be  slightly  differ- 
ent. In  the  case  of  coal,  the  method  for  many  years 
practiced  by  the  City  of  New  York  in  disposing  of 
its  wharf  privileges  would  doubtless  be  followed. 
Coal  beds  would  be  leased  for  terms  not  exceeding, 
say,  ten  years,  in  lots  to  suit,  to  the  bidders  offering 
the  government  the  greatest  royalty  per  ton  of  coal 
produced.  Forfeiture  of  the  privileges  granted 
would  be  the  penalty  for  failing  to  mine  in  any  one 
year  a  stipulated  minimum  number  of  tons,  the  num- 
ber being  in  proportion  to  the  magnitude  of  the  bed 


234  The  Problem  of  the  Unemployed 

leased.  On  the  expiration  of  a  lease,  whether  from 
forfeiture  or  lapse  of  time,  so  much  of  the  coal  bed  as 
then  remained  would  be  leased  for  another  term  to 
the  best  bidder,  the  new  lessee  being  required  to  pay 
his  predecessor  the  actual  value  of  the  improvements. 
A  miner,  therefore,  on  finding  out  that  his  bid  was 
too  high — that  he  could  not  continue  to  pay  the  roy- 
alty agreed  upon  and  compete  with  other  operators — 
could  safely  submit  to  a  forfeiture  and  take  the 
chance  of  leasing  the  land  on  better  terms,  since, 
if  any  one  bid  over  him,  he  would  still  recover  the 
value  of  his  improvements.  The  purpose  of  the 
government  would  be,  not  to  obtain  the  greatest 
possible  income  from  ro^'alties,  as  in  the  case  of  pri- 
vate ownership,  but  to  bring  about  conditions  under 
which  consumers  would  be  furnished  with  coal  at 
as  near  the  cost  of  production  as  possible.  This 
would  be  accomplished  in  the  manner  described, 
since  no  one  would  then  be  able  to  derive  profit  from 
holding  coal  lands  in  idleness,  unused  coal  beds  being 
practically  free  to  whoever  chose  to  operate  them. 
It  would,  therefore,  take  little  capital  to  become  a 
coal  mine  operator;  hence  the  number  of  coal  mine 
employers  would  be  increased  to  the  advantage  of 
employees  as  well  as  consumers. 

Under  these  conditions,  only  the  coal  beds  most 
conveniently  located  and  most  easily  worked  would 
be  operated  at  first — beds  from  which  the  greatest 
amount  of  coal  could  be  produced  with  the  least 
amount  of  effort — but  the  royalties  paid  would  never- 
theless be  small,  on  account  of  proximity  to  vast 
quantities  of  unused  and  practically  free  coal  lands. 
It  follows,  therefore,  that  prices  to  consumers  would 


The  Nationalization  of  Land  235 

be  but  little  above  the  cost  of  production,  provided 
railroad  rates  were  alike  to  all  and  were  limited  to 
reasonable  profits  on  improvement  and  equipment 
values.  It  may  be  remarked  that  a  people  with  suf- 
ficient virtue  and  intelligence  to  accomplish  the  prac- 
tical nationalization  of  land  would  not  submit  to 
unjust  discrimination,  or  extortionate  charges  on  the 
part  of  public  service  corporations.*  Assuming  that 
this  would  be  the  case,  and  it  can  be  easily  shown 
that  6%  interest  on  all  capital  invested  in  mining, 
transporting  and  selling  coal  could  be  allowed,  the 
wages  of  miners,  railroad  employees,  and  all  engaged 
in  handling  it  could  be  doubled,  and  yet  the  price  of 
anthracite  coal  in  New  York  City  would  be  reduced 
perhaps  one-third.  As  it  is  now,  on  an  average  the 
consumer  pays,  say,  $5.00  a  ton  for  coal,  of  which 
labor  gets  approximately  $1.25,  capital  75  cents,  and 
land  and  railroad  franchises  $3.00.  Under  the  free 
land  conditions  described,  the  consumer  would  pay 
$3.50  per  ton  for  coal,  of  which  labor  would  get 


*No  difficulty  will  be  experienced  in  preventing  rebates,  and 
in  securing  uniform  and  reasonable  rates,  when  it  is  fully 
realized  that  railroads  and  all  public  utility  corporations  are 
mere  servants  of  the  people,  and  as  such  entitled  only  to  the 
chance  of  making  reasonable  profits,  say,  not  exceeding  six 
or  eight  per  cent  on  the  actual  capital  invested.  The  prob- 
lem will  be  simplified  rather  than  rendered  more  complex  by 
mergers  and  combinations  carried  no  matter  to  what  extent. 
Effective  publicity  alone  will  secure  the  observance  of  law  on 
the  part  of  such  corporations,  and  render  it  easy  to  obtain  all 
reasonable  reductions  in  rates,  either  by  the  aid  of  commis- 
sions or  otherwise.  But  the  publicity  must  be  effective,  and 
it  cannot  be  made  so  unless  the  books  of  public  utility  com- 
panies are  kept  under  the  supervision  of  government  experts 
and  in  accordance  with  uniform  methods  prescribed  by  them. 
It  is  now  a  penitentiary  offense  to  make  a  false  entry  in  the 
books  of  a  national  bank.  Why  should  the  penalty  be  less 
in  the  case  of  a  franchise-enjoying  corporation? 


236  The  Problem  of  the  Unemployed 

approximately  $2.50,  capital  75  cents,  and  land  25 
cents.* 

Let  the  reader  consider  for  a  moment  what  a 
reduction  of  33  1-3%  in  the  price  of  coal,  resulting 
not  from  lower  wages,  but  from  the  abolition  of  mon- 
opoly, would  signify.  It  would  bring  needed  warmth 
and  comfort  to  hundreds  of  thousands  of  dreary 
homes.  It  would  stimulate  manufacturing  enter- 
prises, and  reduce  the  cost  of  producing  and  trans- 
porting every  article  which  contributes  to  the  com- 
fort and  happiness  of  mankind.  An  enormous 
increase  in  the  demand  for  coal  would  produce  an 
enormous  increase  in  the  demand  for  labor  employed 
in  mining  it,  and  from  this  would  follow  an  increase 
in  the  wages  of  the  miner. 

And  so  in  all  departments  of  industry  everywhere, 
in  like  manner  and  from  like  causes,  the  exactions  of 
monopoly  would  melt  away  and  the  rewards  of 
effort  would  increase  proportionately. 

What,  then,  would  the  man  of  means  do  with  his 
wealth  as  it  accumulates?  He  could  no  longer  invest 
it  in  land,  and,  snapping  his  fingers  in  the  face  of 
labor,  buy  with  it  the  privilege  of  taxing  his  fellow 
men.  All  such  avenues  for  increasing  one's  wealth 
would  be  closed.  As  a  general  rule,  no  income  could 
be  realized  from  wealth  unless  it  was  so  invested  as 
to  give  employment  to  labor,  while  the  obstacles  to 
such  investment  which  the  price  of  land  now  inter- 
poses would  have  vanished.  Everywhere  on  the 
borders  of  compactly  settled  communities,   where 

*The  figures  used  above  are  intended  merely  as  illustrative 
of  how  free  land  conditions  with  respect  to  coal  would  reduce 
the  price  and  change  the  ratio  of  the  division  of  the  product 
between  the  factors  of  land,  capital  and  labor. 


The  Nationalization  of  Land  237 

all  the  advantages  of  a  highly  developed  civiliza- 
tion could  be  enjoyed,  would  be  found  land  prac- 
tically free  and  open  to  all  who  cared  to  use  it  for 
wealth-producing  purposes. 

Is  it  not  evident  that  the  position  of  capital  and 
labor  would  then  be  reversed?  Capitalists  would 
then  beg  for  employers  to  use  idle  capital,  and  em- 
ployers would  beg  for  employees  even  as  employees 
beg  now  for  employment.  This  being  so,  labor 
unions,  walking  delegates,  strikes  and  boycotts  would 
be  unheard  of. 

If  economic  rent  were  appropriated  by  taxation, 
there  would  be  no  occasion  for  trade  unions,  and 
working  men  would  no  longer  be  required  in  self- 
defense  to  submit  to  the  tyranny  of  labor  organiza- 
tions. No  grinding  down  of  wages  could  then  result 
from  individual  freedom  of  contract  between  em- 
ployer and  employee.  If  one  laborer  worked  fifteen 
hours  in  a  day  instead  of  eight  hours,  and  if  another 
did  twice  as  much  work  in  a  given  time  as  the  aver- 
age of  his  class,  none  would  object.  For  additional 
wages  would  then  inevitably  be  the  reward  of  addi- 
tional effort;  therefore,  the  pace  set  by  the  extra 
efficient  workmen  could  not  result  in  the  reduction 
of  the  wages  of  the  less  efficient  ones.  At  present, 
however,  extra  efficiency  on  the  part  of  a  few  tends 
to  reduce  the  wages  of  all;  hence  the  necessity  of 
trade  union  regulations  compelling  all  to  conform  to 
a  dull  average  of  mediocrity.  This  not  only  destroys 
individuality  and  lessens  the  interest  of  the  working 
man  in  his  task,  but  it  also  largely  decreases  the 
amount  of  wealth  which  would  otherwise  be  pro- 
duced; yet,  but  for  such  regulations,  wages  under 


238  The  Problem  of  the  Unemployed 

present  unnatural  conditions  would  inevitably  sink 
to  the  very  starvation  point.* 

The  truth  of  what  is  stated  in  the  preceding  para- 
graph, that  labor  unions  would  then  be  unnecessary, 
can  also  be  proven  by  the  law  of  rent  and  its  corol- 
lary, the  law  of  wages.  The  reasoning,  though  some- 
what technical  and  calling  for  the  close  attention  of 
the  student,  is  unanswerable.  Briefly  recapitulated, 
it  is  as  follows :  Wages  never  naturally  rise  above, 
but  always  tend  to  fall  to  the  level  fixed  by  what 
labor  can  earn  on  free  land,  since  all  which  a  given 
amount  of  effort  can  produce  on  any  land  in  excess 

*The  effect  on  wages  generally  at  present  cf  some  workmen 
trying  to  excel  other  workmen  in  the  same  line  of  employment 
is  shown  by  the  following  extract  from  "The  Story  of  a  Rus- 
sian Workman,"  published  in  The  Outlook: 

"Some  years  ago,  my  boss  said  to  me,  'For  every  bolt  you 
make  we  pay  three  copecks.  Now,  you  are  a  fast  man.  Why 
don't  you  make  more  money?  You  can  make  more  than  all 
the  other  men.'  So  I  worked  faster.  In  a  few  weeks  I  was 
making  one  hundred  and  fifty  bolts  a  day — four  and  a  half 
($2.25)  rubles  a  day.  Then  the  gentlemen  who  directed  the 
factory  said,  'Oh,  this  is  too  much  for  so  simple  a  fellow.'  So 
they  decided  to  pay  a  lower  price  for  each  bolt.  They  did. 
But  the  baby  had  come,  and  I  worked  still  faster.  The  other 
men  had  to  keep  as  close  behind  me  as  they  could,  and  so  they 
all  worked  faster.  Then  again  I  got  up  to  $2.25  a  day.  Again 
they  said,  'Oh,  this  is  too  much  for  so  simple  a  fellow.'  They 
decided  to  lower  the  price  again  on  each  bolt.  *  *  *  In  a  few 
years  this  clever  boss,  who  gets  a  commission,  he  has  made 
us  work  faster  and  faster,  while  our  wages  stayed  the  same. 
Only  a  few  of  us  are  making  more  money — a  little  more,  per- 
haps fifteen  per  cent.  But  even  for  us  it  is  bad  to  have  so. 
many  others  working  cheaper.  Some  of  them  may  any  day  do 
our  work  for  still  lower  wages.  Now,  what  are  you  going  to  do 
about  this?  Is  it  right  to  keep  always  working  faster?  I  want 
no  more  of  the  old  slow  factories;  they  are  all  over  Russia  and 
are  very  bad  for  this  country.  But  lo^k  here — when  I  keep 
working  faster,  I  want  to  get  paid  more  and  more.  And  how 
can  this  be  if  the  employers  keep  lowering  the  price  for  each 
bolt  I  make?  And  who  wants  to  stop  them  from  lowering  the 
price?  Only  the  workmen.  If  we  don't  stop  them,  no  one  else 
will.     So  we  must  have  more  and  more  labor  unions." 


The  Nationalization  of  Land  239 

of  what  it  can  produce  on  the  least  productive  land 
in  use,  or  on  free  land,  goes  in  the  long  run  to  land 
owners,  either  in  the  form  of  rent  or  of  increase  in 
the  value  of  land.*  Free  land,  or  the  least  product- 
ive land  in  use,  is  now  so  remote  from  centers  of 
population,  or  so  lacking  in  fertility,  that  wages 
made  upon  it  are  little  more  than  sufficient  for  the 
laborer's  maintenance,  hence  wages  in  general  natur- 
ally tend  to  fall.f  This  natural  tendency  can  be 
resisted  at  present  only  by  artificial  methods.  It 
therefore  follows  that  trade  union  combinations  are 
necessary  under  existing  conditions,  and  that,  but 
for  them,  wages  would  ultimately  decline  to  the  very 
starvation  point.  Under  free  land  conditions,  how- 
ever, it  would  be  different.  Now,  the  agricultural 
laborer  on  free  land,  which  can  only  be  found  remote 
from  markets,  and  where  he  is  denied  the  co-oper- 
ative advantages  of  a  highly  developed  civilization, 
can  eaisn,  say,  but  a  dollar  a  day;  then  free  land 
being  always  close  at  hand  and  adjoining  thickly  set- 
tled communities,  he  could  earn  upon  it,  say  two  or 
three  dollars  a  day,  since,  on  unused  land  of  this 
character  much  more  wealth  can  be  produced  with 
the  same  amount  of  effort.  This  increase  in  the 
wages  of  the  agricultural  laborer  would  cause  a 
proportionate  increase  in  the  wages  of  all  labor- 
ers, and  such  increase  would  come  naturally,  with- 
out the  aid  of  trade  union  combinations,  and  not- 


*The  law  of  wages,  as  already  stated,  is  to  the  effect  that  the 
higher  wages  are  on  free  land,  or  on  the  least  productive  land 
in  use,  the  higher  wages  will  be  on  all  lands;  the  converse 
of  this  is  also  of  course  implied. 

tThis  is  the  cause  of  the  so-called  iron  war  of  wages 
announced  by  Ricardo. 


240  The  Problem  of  the  Unemployed 

withstanding  perfect  individual  freedom  of  contract 
between  employer  and  employee.  For  it  is  evident 
if  comparatively  unskilled  labor  could  always  make 
two  or  three  dollars  a  day  on  free  land,  laborers  of 
the  same  grade  in  other  lines  of  employment  would 
never  work  for  less  on  any  land;  and  if  the  wages 
of  this  class  of  labor  were  thus  by  natural  methods 
doubled  and  trebled,  the  wages  of  all  classes  of  labor 
would  be  increased  in  something  like  the  same  pro- 
portion without  artificial  aids  of  any  character. 

Again,  since  under  prevailing  conditions  improve- 
ments in  labor-saving  processes  do  not  naturally 
increase  wages,  the  working  man  can  reap  no  benefit 
from  the  increased  amount  of  wealth  which  they 
enable  him  to  produce,  without  resort  to  the  arti- 
ficial aid  of  trade  union  combinations.  This  is  so 
at  present,  because  such  inventions  naturally  in- 
crease rent  and  the  value  of  land  without  increas- 
ing wages  or  rates  of  interest.  In  other  words,  in 
the  division  of  the  product  among  land,  capital  and 
labor,  the  additional  wealth  produced  by  such  im- 
provements goes  to  land  owners  in  the  form  of 
increase  in  rent  and  increase  in  the  value  of  land, 
and  not  to  laborers  and  capitalists  in  the  form  of 
increase  in  wages  or  increase  in  rates  of  interest. 
With  free  land  conditions,  however,  none  of  this 
increase  would  go  to  land  owners  as  such ;  hence  all 
of  it  would  go  to  capitalists  and  laborers,  and  since,, 
as  already  shown,  rates  of  interest  would  not  ad- 
vance, all  of  the  increase  in  the  product  resulting 
from  improvements  in  labor-saving  processes  would 
go  to  labor  in  the  form  of  increased  wages,  includ- 
ing the  wages  of  both  employer  and  employee.  But 
the  employee,  owing  to  the  small  amount  of  capital 


The  Nationalization  of  Land  241 

which  would  then  be  required  to  enable  any  one  to 
profitably  employ  himself  upon  nearby  free  land, 
would  be  so  independent  of  the  employer  that  he 
could  command  and  receive  as  wages  approximately 
all  the  wealth  which  he  produced.  The  wages  of 
employees  as  well  as  those  of  employers  would  there- 
fore naturally  increase  with  every  invention  which 
increased  their  wealth-producing  powers ;  and  thus, 
with  the  removal  of  the  cause  which  rendered  them 
necessary,  trade  union  combinations  would  disap- 
pear. 

Not  only  would  the  cause  which  produces  the  labor 
union  be  removed,  but,  to  a  great  extent  at  least, 
the  causes  which  bring  about  trusts  and  combina- 
tions in  restraint  of  trade.  For  no  one  would  then 
contend  that  a  tariff  was  needed  for  the  protection 
of  the  American  working  man.  It  would  then  be 
clearly  seen  that  the  sole  cause  of  the  high  wages 
which  he  enjoyed  was  the  abundance  of  practically 
free  land  to  be  found  everywhere  close  at  hand. 
Wages  in  the  early  part  of  the  nineteenth  century, 
for  instance,  before  a  protective  tariff  was  inaugu- 
rated, were  higher  in  America  than  in  any  of  the 
countries  of  Europe,  the  advantage  in  favor  of  the 
American  working  man  being  even  greater  compara- 
tively than  at  present.  This  was  so  because  land 
was  cheaper  here  than  in  Europe ;  or,  in  other  words, 
because  the  rewards  of  effort  on  the  least  productive 
lands  in  use  were  greater  here  than  there.  And  for 
this  reason  wages  have  always  been  higher  in  the 
United  States  than  in  England. 

Without  a  protective  tariff — so  well  described  by 
Mr.  Havemeyer  as  the  "mother  of  trusts" — with  no 
discrimination    in    railway    charges,    with    railway 


242  The  Problem  of  the  UneynplQijed 

rates  based  largely  if  not  solely  on  the  improvement 
and  equipment  valuations  of  railroads,  with  free  land 
conditions  in  respect  to  coal  beds  and  mineral  de- 
posits, the  very  life  would  be  taken  from  nearly  every 
trust  which  now  defies  the  law  of  competition  and 
prevents  the  exercise  of  individual  initiative. 

Again,  with  increase  of  wages  to  employees  as 
well  as  to  employers,  would  come  a  general  increase 
of  intelligence,  and  voluntary  co-operative  associa- 
tions would  doubtless  assume  proportions  undreamed 
of  at  present.  Consumers  of  all  classes  would  thus 
be  guarded  against  the  rapacity  of  merchants  and 
middlemen,  as  is  already  largely  the  case  in  England. 

Nor  is  it  clear  (theories  of  doctrinaires  notwith- 
standing) that  any  line  would  then  be  drawn,  put- 
ting an  arbitrary  limit  to  the  functions  of  govern- 
ment at  the  franchise  or  anywhere  else.  Man  ever 
strives  to  bring  about  the  greatest  results  with  the 
least  amount  of  work,  and  it  is  difficult  to  see  how  the 
natural  law  could  be  violated  by  allowing  the  gov- 
ernment to  do  anything  which  experience  shows  it 
can  do  with  less  expenditure  of  human  labor  than 
would  be  the  case  if  it  were  done  by  private  citizens. 
The  only  questions  to  be  then  considered  in  deciding 
whether  any  certain  enterprise  ought  to  be  under- 
taken by  the  government  or  not,  would  perhaps  be, 
which  will  perform  the  service  cheaper,  the  govern-, 
ment  or  the  individual?  With  unlimited  opportuni- 
ties for  profitable  private  employment  produced  by 
free  land  conditions,  it  is  possible  that  little  attention 
would  then  be  paid  to  the  plea  that  it  is  unfair  for 
the  government  to  compete  with  private  interests  in 
any  field  of  enterprise  in  which  it  can  serve  the 


The  Nationalization  of  Land  243 

people  cheaper  and  better  than  they  are  being  served 
by  individuals  and  corporations. 

The  City  of  Boston  sells  coal  to  its  school  board 
and  eleemosynary  institutions ;  if  so,  what  real  objec- 
tion can  there  be  to  its  selling  coal  to  private  indi- 
viduals, should  experience  prove  that  coal  can  thus 
be  distributed  among  consumers  generally  in  that 
city  at  a  saving  of  cost  and  labor?  What  better  or 
simpler  method  could  be  devised  for  rendering  inef- 
fective an  agreement  among  coal  dealers  to  charge 
unreasonable  prices? 

Some  years  ago,  the  steamship  companies  engaged 
in  carrying  the  twelve  million  dollars'  worth  of 
refrigerated  meats  annually  exported  at  that  time 
from  New  Zealand  to  England,  formed  a  pool  and 
raised  freight  rates.  They  were  notified  by  the 
Prime  Minister  of  New  Zealand  that  unless  the  old 
rates  were  restored,  the  government  would  put  on 
its  own  line  of  steamers.  This  threat  was  effective, 
and  rates  were  at  once  reduced  to  the  former  level. 

The  manufacturers  of  twine  used  in  harvesting 
small  grains  formed  a  tariff  protected  trust,  and 
doubled  the  price  of  this  article.  Minnesota  and 
Iowa  then  began  the  manufacture  of  binding  twine 
with  convict  labor,  and  the  price  of  it  soon  fell  50% 
in  those  States. 

Who  shall  say  that  methods  of  the  character  noted 
above  would  not  prove  to  be  the  best  which  could  be 
adopted  for  the  protection  of  the  people  against  the 
exactions  of  such  trusts,  if  any,  as  might  survive 
the  abolition  of  every  form  of  legalized  special  privi- 
lege? The  experience  of  New  Zealand  shows  that 
methods  of  this  kind  would  be  effective  at  least.  The 
government  there  not  only  operates  all  public  utili- 


244  The  Problem  of  the  Unemployed 

ties,  but  it  also  competes  with  individuals  in  the  busi- 
ness of  banking,  of  loaning  money  on  real  estate,  of 
insuring  lives  and  property,  of  mining  coal,  and 
even  to  some  extent  of  carrying  on  ordinary  manu- 
facturing establishments.  There  are  no  trusts,  as 
we  use  the  term,  in  that  country,  nor  is  it  probable 
that  they  could  thrive  and  prosper  under  conditions 
existing  there. 

Whenever,  in  the  manufacture  or  distribution  of 
products,  in  the  insuring  of  lives  or  property,  or  in 
the  performance  of  any  character  of  service,  unrea- 
sonable charges  are  extorted  by  means  of  oppressive 
combinations,  the  real  remedy  for  the  evil  may  be 
found  in  the  readiness  of  the  government,  either 
national,  state  or  municipal,  as  the  case  may  require, 
to  become  an  active  competitor  in  the  business  thus 
monopolized.  The  fear  of  arousing  competition  from 
such  a  source  would  doubtless  in  most  instances  be 
sufficient  in  itself,  as  in  New  Zealand,  to  prevent 
the  formation  of  any  combination  in  restraint  of 
trade. 

We  may  smile  at  the  idea,  but  should  the  State 
of  Kansas,  by  means  of  a  great  oil  refinery  which 
it  was  once  proposed  to  build,  be  able  to  demonstrate 
that  illuminating  oil  can  be  produced  and  sold  by 
State  governments  at  prices  greatly  below  those  now 
charged  by  the  Standard  Oil  monopoly,  would  it  not 
be  foolish  to  allow  the  mere  spectre  of  State  socialism 
to  deter  us  from  extending  the  experiment  into 
other  fields  and  into  other  lines  of  enterprise  ?  What 
is  there  in  the  dream  of  the  most  ultra  socialist  to 
terrorize  one  who  believes  in  the  fullest  measure  of 
individual  liberty?    Is  it  likely,  when  special  privi- 


The  Nationalization  of  Layul  245 

leges  and  the  private  appropriation  of  rent  shall  have 
become  things  of  the  past,  and  all  shall  have  tasted 
the  fruits  of  industrial  freedom,  that  the  people  will 
then  consent  to  be  shackled  by  a  socialistic  bureau- 
cracy? 

Suppose  the  vision  of  Bellamy  about  the  carrying 
on  by  the  government  of  immense  factories,  shops, 
stores,  and  hostelries,  banking  and  insurance  enter- 
prises, were  realized,  and  most  of  the  waste  of 
energy  now  resulting  from  competition  were  thus 
avoided ;  this  would  only  signify  that  experience  had 
shown  that  in  many  instances  and  under  certain  cir- 
cumstances the  government  could  obtain  the  same  or 
better  results  with  less  expenditure  of  human  effort 
than  the  individual,  but  it  would  not  prove  that  it 
could  do  so  in  all  cases  and  under  all  circumstances. 
With  a  telephone  and  an  electric  motor  on  every 
farm  and  in  every  home,  and  a  trolley  line  or  its 
equivalent  at  almost  every  door,  numberless  articles 
of  comfort  and  luxury  could  doubtless  then  be  made 
to  greater  advantage  in  small  shops,  and  at  the  very 
homes  of  the  workmen,  than  in  great  factories ;  and 
especially  so  when  the  craftsman's  individuality  of 
design  or  finish  was  desired.  Again,  it  is  impossible 
to  conceive  of  any  saving  of  labor  by  the  govern- 
ment's engaging,  for  instance,  in  the  cultivation  of 
the  soil.  In  this,  the  most  important  of  all  pursuits, 
as  well  as  in  all  others  in  which  energy  is  not  largely 
dissipated  by  competition,  labor  would  be  wasted 
rather  than  saved  were  the  State  to  attempt  the  role 
of  employer. 

It  therefore  follows,  since  man  always  seeks  to 
accomplish  as  much  as  possible  with  as  little  work  as 


246  The  Problem  of  the  Unemployed 

possible,  that  no  matter  how  rapid  the  drift  in  this 
direction  may  seem,  the  socialistic  commonwealth 
can  never  be  attained,  nor  need  the  fear  of  it  lead 
the  individualist  to  dread  any  extension  of  the  func- 
tions of  government  which  imply  either  a  saving  of 
labor  or  relief  from  monopoly. 


CHAPTER  XVII. 

NATURAL  TAXATION. 

THE  nationalization  of  land  can  be  brought  about 
gradually  by  dropping  one  after  the  other  taxes 
levied  on  industry  and  the  products  of  industry,  and 
concentrating  all  taxation  on  the  rental  value  of  land. 
In  other  words,  it  can  be  accomplished  by  a  single 
tax  on  land  values.  Since  this  method  of  taxation 
is  in  harmony  with  the  natural  law,  and  violates  none 
of  its  canons,  it  is  rightly  called  Natural  Taxation. 

It  is  obvious  that  no  tax  should  be  levied  which 
cannot  be  collected  economically  and  without  invid- 
ious distinctions  between  individuals ;  neither  should 
a  tax  directly  discourage  the  production  of  wealth, 
nor  should  it  be  so  adjusted  as  to  bear  with  unneces- 
sary weight  upon  the  very  poor.  These  are  self- 
evident  truths,  and  any  scheme  of  taxation  which 
fails  to  harmonize  with  them  is  unsound,  and  must 
ultimately  be  discarded. 

It  is  sometimes  thoughtlessly  remarked  that  since 
a  certain  amount  of  money  must  be  raised  for  the 
support  of  government,  the  manner  of  obtaining  it 
is  of  small  importance.  As  well  might  it  be  said  that 
since  a  horse  must  haul  a  certain  amount  of  freight, 
it  is  immaterial  whether  the  cart  be  fastened  to  his 
tail  or  to  his  shoulders.  An  improper  adjustment 
of  the  burden  of  taxation  will  not  only  lessen  the 
amount  of  wealth  which  would  otherwise  be  pro- 
duced, but  it  may  result  in  the  total  destruction  of 


248  The  Problem  of  the  Unemployed 

the  wealth  attempted  to  be  taxed.  Thus,  the  Egyp- 
tian government  once  increased  the  tax  on  date 
trees  to  such  an  extent  that  owners  cut  them  down 
in  self-defense,  and  thousands  of  acres  of  date 
groves,  some  of  which  had  been  producing  wealth 
for  centuries,  were  destroyed,  being  literally  taxed 
to  death. 

Nothing  is  more  conducive  to  health,  contentment 
and  energy  than  plenty  of  windows  for  light  and 
ventilation  in  the  homes  in  which  human  beings  must 
rest  and  eat  and  sleep,  yet  in  some  of  the  countries 
of  Europe,  even  to  this  day,  windows  are  taxed; 
hence  in  such  countries  as  few  windows  as  possible 
are  placed  in  houses  occupied  by  working  men ;  and 
huts  in  which  tens  of  thousands  of  peasants  are 
living  have  no  windows  at  all.  It  is  evident  that 
such  a  tax  reduces  the  wealth-producing  power  of 
those  by  whom  it  must  be  directly  or  indirectly  paid. 

Again,  farmers  for  instance  cannot  produce  wealth 
with  which  to  pay  taxes  v/ithout  teams,  cattle,  agri- 
cultural implements  and  household  furniture.  Yet 
in  hundreds  of  thousands  of  instances  the  Russian 
tax  gatherer  on  his  annual  rounds  ruthlessly  strips 
the  peasant  of  these  tools  of  his  trade,  and  in  this 
way  whole  communities  are  often  pauperized.  The 
goose  which  lays  the  golden  egg  is  thus  destroyed 
by  taxation. 

Everywhere,  even  in  this  country,  people  are 
crowded  into  ugly,  inconvenient  and  unsanitary 
buildings.  Everywhere  the  man  who,  risking  loss 
of  capital  in  doing  so,  erects  upon  his  land  a  dwell- 
ing, a  barn,  a  storehouse,  or  a  factory,  or  opens  up  a 
farm,  or  makes  any  other  kind  of  improvement,  is  a 
public  benefactor.    Yet  we  punish  him  for  thus  em- 


Natural  Taxation  249 

ploying  labor  on  land  previously  unused,  by  increas- 
ing his  taxes.  We  fine  him  for  making  his  land 
useful  to  mankind.  Before  he  improves  the  land,  he 
pays  the  government  in  the  form  of  a  tax  a  certain 
sum  of  money  for  its  exclusive  possession ;  as  soon 
as  he  ceases  to  be  a  dog  in  the  manger  and  does 
something  with  it  of  benefit  to  the  public,  something 
which  gives  additional  value  to  all  the  land  in  the 
neighborhood,  we  reward  him  for  his  enterprise  by 
doubling  his  taxes. 

A  hard  working  farmer  moves  into  a  sparsely 
settled  region,  buys  100  acres  of  vacant  land  from 
some  speculator,  owning  perhaps  thousands  of  acres 
of  adjoining  unused  land,  and  opens  up  a  farm.  The 
neM'^  comer  receives  a  hearty  welcome  from  those 
who  have  settled  there  in  advance  of  him.  All  of 
them  are  eagerly  looking  forward  to  the  time  when, 
with  increase  of  population,  will  come  better  roads, 
schools,  transportation  facilities  and  the  thousand 
and  one  economic  and  social  advantages  of  a  com- 
pactly built  community,  but  the  speculator's  consent 
must  first  be  obtained.  Consent  having  been  se- 
cured, at  the  cost  perhaps  of  half  or  more  of  the 
settler's  meager  capital,  the  government  then  steps 
in  and,  by  taxing  his  improvements,  compels  him  to 
pay  often  three  or  four  times  as  much  every  year 
for  using  the  land  as  the  speculator  pays  for  holding 
his  land  in  idleness. 

Ask  the  owner  of  any  vacant  lot  surrounded  by 
handsome  buildings  in  a  city,  why  he  allows  such 
valuable  land  to  remain  idle,  and  his  reply  will 
probably  be  that  in  his  judgment  non-use  of  it  pays 
better  than  use.  As  it  is  now  he  can  afford  to  let  it 
lie  idle,  since  the  energy  of  those  who  improve  ad- 


250  The  Problem  of  the  Unemployed 

joining  lands  will,  year  by  year,  add  to  its  value 
without  risk  or  exertion  on  his  part.  Would  this  so 
often  be  the  case  if  improvements  were  untaxed  and 
the  deficit  made  up  by  an  increase  in  the  land  value 
tax? 

It  can  thus  be  shown  by  numberless  illustrations 
that  a  tax  on  improvements  on  land  discourages 
industry  and  enterprise,  and  encourages  idleness 
and  stagnation.  And  this  is  also  true  as  to  taxes 
levied  upon  chattels  coming  within  the  definition  of 
personal  property.  If  it  were  not  so,  why  do  enlight- 
ened communities  sometimes,  for  instance,  exempt 
from  taxation  fine  stock  used  for  breeding  purposes  ? 
Such  an  exemption  is  merely  a  remission  of  the  fine 
which  would  otherwise  be  imposed  on  the  owner  for 
importing  the  stock.  The  fine  is  remitted  on  the 
theory  that  the  community  is  benefited  by  having 
the  stock  brought  in.  But  would  not  the  community 
be  benefited  also  by  an  increase  in  the  stocks  of  goods 
of  its  merchants,  by  an  increase  in  the  capital  of  its 
banks,  by  an  increase  in  the  labor-saving  machinery 
used  by  its  farmers,  by  an  increase  in  the  number 
of  looms  and  spindles  in  the  factories?  Why  not 
then  remit  the  fine  imposed  by  taxation  upon  these 
things  also,  and  in  fact  upon  everything  produced 
by  labor  which  is  useful  in  the  production  of  wealth? 

A  tax  on  improvements,  or  on  personal  property, 
not  only  violates  the  canons  of  natural  taxation,  by 
discouraging  the  production  of  wealth,  and  by  plac- 
ing unnecessary  burdens  upon  enterprise,  but  it  does 
so  also  because  it  is  a  tax  which  cannot  be  collected 
impartially  or  with  any  degree  of  fairness  between 
individuals.  This  is  especially  true  as  regards  all 
attempts  to  tax  credits,  whether  evidenced  by  bonds 


Natural  Taxation  251 

or  promissory  notes  or  otherwise.*  On  this  point, 
Mr.  Shearman,  in  Natural  Taxation,  wrote  as  fol- 
lows: 

"If  anything  in  human  experience  as  applied  to 
methods  of  taxation  is  settled,  it  certainly  is  the  fact 
that  taxation  upon  personal  property  never  can  be 
made  a  success.  Taxes  can  be  raised  from  personal 
property,  no  doubt ;  for  large  sums  of  money  are  thus 
raised ;  but  that  they  cannot  be  levied  with  any  reas- 
onable approach  to  accuracy  or  equality  is  demon- 
strated, not  only  by  conclusive  reasoning,  but  by  the 
more  conclusive  fact  that  they  have  never  been  thus 

*"It  makes  liars  and  perjurers  of  all  who  are  subject  to  its 
operations,  as  shown  in  the  following  illustrations:  Some 
years  ago  a  returned  missionary  took  up  his  abode  in  a  town 
of  about  10,000  inhabitants  in  Ohio.  His  entire  fortune, 
amounting  to  the  munificent  sum  of  $3,000,  was  loaned  at  5% 
interest.  When  the  time  for  preparing  the  assessment  rolls 
came  around,  he  was  furnished  by  the  tax  assessor  with  the 
usual  blanks  to  be  filled  out  and  sworn  to,  in  which  he  was 
required  to  list  and  appraise,  among  other  things,  his  house- 
hold furniture  and  library,  and  also  all  money  loaned  on  mort- 
gage or  otherwise.  He  was  an  honest  and  truthful  man.  His 
furniture  and  library  had  cost  about  $1,800,  which  he,  with 
some  qualms  of  conscience,  however,  appraised  at  $500,  on  the 
theory  that  while  it  was  really  wortli  more,  it  would  not  bring 
more  at  forced  sale.  He  also  made  affidavit  to  the  simple  fact 
that  he  had  $3,000  loaned  on  mortgage  security,  and  that  this 
credit  was  worth  $3,000.  How  could  he,  with  the  fear  of  God 
in  his  heart,  do  otherwise?  Now  while  there  w^ere  in  this  town 
one  or  two  millionaires,  and  numbers  of  people  worth  more 
than  a  hundred  thousand  dollars  each,  and  scores  of  residences 
in  which  the  books  and  furniture  were  worth  from  five  to  ten 
thousand  dollars,  yet  the  assessment  rolls  that  year  showed 
that  this  poor  missionary  was  living  in  the  most  expensively 
furnished  house  in  the  place,  and  that  he  was  one  of  the  largest 
lenders  of  money  which  it  afforded.  The  tax  rate  was  2i/^%, 
hence  the  missionary  was  able  to  net  2l':>7r  interest  on  his  loan. 
He  had  the  poor  satisfaction  of  knowing,  however,  that  of  all 
the  people  in  that  town  who  had  filled  out  and  sworn  to  an 
assessment  blank,  he  was  the  only  one  who  had  not  delib- 
erately committed  perjury.  It  is  safe  to  say  that  instances 
like  this  can  be  duplicated  in  every  community  in  the  United 
States  where  a  single  honest  rendition  of  personal  property 
for  taxes  can  be  found,  even  if  this  story  is  not  literally  true 
in  all  respects. 


252  The  Problem  of  the  JJyiemploycd 

levied.  It  is  not  for  want  of  earnest  and  long  sus- 
tained effort  that  the  failure  of  this  system  of  taxa- 
tion has  come  to  pass.  For  centuries  the  effort  has 
been  made;  and  for  at  least  six  centuries  it  was 
backed  by  all  the  power  of  a  government  which  com- 
manded the  whole  civilized  world,  and  which  armed 
its  tax-gatherers,  not  with  the  paltry  weapons  of 
oaths  and  penalties,  but  with  the  more  substantial 
powers  of  indiscriminate  search,  the  lash,  the  rack, 
the  thumbscrew,  the  gridiron,  and  the  cross.  The 
Roman  empire  fell  to  pieces  under  the  pressure  of 
this  vain  effort  to  reach  personal  property  by  taxa- 
tion.    *     *     * 

"Gibbon  mentions,  quite  as  a  matter  of  course, 
that  fathers  murdered  their  children  on  a  large  scale, 
principally  as  a  result  of  fear  of  tax-gatherers ;  that 
racks  and  scourges  were  freely  used;  that  the  ap- 
proach of  the  tax-gatherer  'was  announced  by  the 
tears  and  terrors  of  the  citizens';  and  that  false 
returns  were  punished  with  horrid  deaths,  as  being 
both  'treason  and  sacrilege'  (History,  chapters  xiv 
and  xvii). 

"That  which  all  the  tremendous  power  of  Rome  in 
its  grandest  days  failed  to  accomplish,  that  which 
the  infernal  tortures  of  Spain  could  not  accomplish, 
when  it  beheaded  hundreds,  burned  thousands,  and 
massacred  tens  of  thousands,  letting  loose  a  brutal 
soldiery  in  a  vain  struggle  to  tax  the  Netherland.*^, 
American  farmers  are  still  apparently  convinced 
that  they  can  accomplish  by  distributing  blank 
forms,  administering  long  oaths,  and  threatening 
penalties  of  fifty  per  cent.  How  far  they  have  suc- 
ceeded, governors,  assessors  and  tax  commissions  in 
New  York,  Ohio,  Maryland,  West  Virginia  and  many 
other  States  have  set  forth  again  and  again,  lament- 
ing the  utter  failure  of  the  system.  Their  complaints 
have  become  monotonous  in  their  uniformity.  *  *  * 

"The  result  of  the  widespread  maintenance  of 
these  taxes  is  to  fill  the  land  with  liars  and  perjurers, 
in  some  States  the  business  of  perjury  is  mostly 


Natural  Taxation  253 

confined  to  the  assessors;  who  regularly  make  re- 
turns which  they  know  to  be  false,  but  cannot  make 
true.  In  others,  such  as  Ohio,  Vermont,  Connect- 
icut, all  the  Southern  States  and  most  of  the  West- 
ern States,  perjury  is  the  business  of  the  tax-payers. 
Their  scrupulous  consciences  in  many  cases  find  a 
way  of  escape  by  omitting,  in  fact,  to  take  the  oath 
which  they  sign;  and  they  are  innocent  of  every- 
thing except  lying.  The  delicately  conscientious  get 
some  one  to  sign  for  them;  and  where  an  oath  is 
absolutely  required,  a  considerate  notary  certifies  to 
the  oath  before  it  is  taken;  after  which,  of  course, 
it  is  not  taken  at  all.  On  surveying  the  whole  field, 
however,  one's  faith  in  American  truthfulness  is 
cheered,  and  we  entertain  large  hope  for  the  future 
of  humanity.  For  it  appears  that  where  blanks  are 
diligently  circulated  and  oaths  insisted  upon,  the 
average  man  will  return  ten,  if  not  fifteen  per  cent, 
of  his  personal  property;  whereas,  in  the  absence 
of  this  appeal  to  piety,  he  will  return  nothing  at  all. 
*  *  *  In  one  town  (in  New  York)  the  proceeds 
of  a  single  auction  sale  of  cattle,  belonging  to  one 
resident,  amounted  to  $360,000 ;  while  the  whole 
assessment  of  personal  property  in  that  town  was 
$28,850;  'a  sum  very  much  less  than  that  obtained 
for  one  cow.' 

"The  assessors  say:  *A  large  percentage  of  all 
the  personal  property  assessed  is  found  entered  on 
the  rolls  to  women,  minor  heirs,  lunatics,  who  can- 
not watch  with  the  eagle  eye  of  business  men,  or  to 
trustees  or  guardians.'  In  some  towns  these  classes 
held  more  than  one-half  of  all  the  personal  property 
on  the  assessment  roll.  Two  women,  residing  in  the 
village  of  Batavia,  were  assessed  for  more  personal 
property  than  all  the  individuals  in  the  neighboring 
city  of  Rochester,  with  a  population  of  70,000.  In 
one  town  a  girl,  mentioned  in  the  assessment  as  a 
lunatic,  was  assessed  $5,000  for  personal  property, 
which  the  assessor  stated  was  the  full  amount  of  her 
personal  estate.    All  over  the  State  'the  amount  of 


254  The  Problem  of  the  Unemployed 

the  assessment  depends  more  on  the  will,  craft,  con- 
science (or  want  of  conscience)  of  the  party  assessed 
than  upon  the  law  or  its  enforcement.' 

"The  state  of  affairs  has  grown  worse  with  each 
succeeding  year.  In  1892  a  ridiculous  law  was 
passed,  much  lauded  by  the  governor,  requiring 
applicants  for  reduction  of  assessment  to  make  oath 
that  they  had  not  incurred  debts  in  the  purchase  of 
non-taxable  property,  or  for  the  purpose  of  avoid- 
ing taxation.  It  ought  to  have  been  entitled:  'An 
act  to  punish  truthfulness  and  to  reward  perjury.' 

"Experienced  assessors  in  every  State  say  that  the 
most  honest  returns  of  property  are  always  made  by 
the  poorer  classes,  and  the  most  inadequate  returns 
by  millionaires;  while  widows  who  have  no  experi- 
ence in  business,  and  trustees  who  represent  widov/s 
and  orphans,  are  taxed  upon  every  dollar  that  they 
own. 

"The  experience  of  California  furnishes  perhaps 
the  latest  example  of  the  utter  failure  of  all  schemes 
for  taxing  personal  property  to  work  out  anything 
like  an  approximation  to  justice. 

"In  1879  a  new  constitution  was  adopted.  *  *  * 
Under  this  constitution  and  these  laws,  not  only 
were  bonds,  money  and  credits  made  taxable,  with- 
out any  deduction  on  account  of  debts,  except  from 
credits,  and  then  only  such  debts  as  are  due  to  resi- 
dents of  the  State  of  California ;  but  holders  of  stock 
in  corporations  were  avowedly  and  intentionally 
subjected  to  double  taxation;  first,  upon  the  cor- 
porate property,  and  again  upon  the  capital  stock, 
which  is  merely  their  evidence  of  title  to  that  prop- 
erty. It  was  supposed,  alike  by  the  friends  and 
enemies  of  the  new  constitution,  that  under  its  oper- 
ation personal  property  of  every  description  would 
be  thoroughly  reached,  and  at  any  rate,  that  what- 
ever was  by  chance  overlooked  would  be  more  than 
made  up  by  double  taxation  upon  that  which  was 
found.  The  actual  result  has  been  to  falsify  all  the 
predictions  of  both  the  friends  and  enemies  of  the 


Natural  Taxation  255 

constitution ;  for  it  has  done  almost  none  of  the  good 
or  evil  which  was  anticipated;  for  the  reason  that 
the  capacity  of  the  patriotic  taxpayer  to  commit  per- 
jury has  been  altogether  underestimated.  Some  of 
the  results  are  positively  ludicrous. 

"If  the  assessment  returns  are  to  be  believed,  in 
nine-tenths  of  California  there  is  not  a  pound  of 
butter;  in  four-fifths  of  the  State  the  sheep  do  not 
produce  any  wool;  fifty  counties  have  quantities  of 
beehives,  but  only  four  have  any  honey;  personal 
property  is  vanishing  from  San  Francisco ;  loans  of 
money  are  becoming  unknown  in  the  rest  of  the 
State;  municipal  bonds  of  all  kinds  are  not  held 
within  the  State  to  an  amount  equal  to  one-tenth  of 
those  outstanding ;  and  finally,  money  has  been  smit- 
ten by  a  pestilence,  two-thirds  of  all  that  was  there 
before  the  adoption  of  the  constitution  having 
already  taken  to  itself  wings,  and  showing  no  signs 
of  returning.     *     *     * 

"The  general  result  has  been  that  the  proportion 
of  personal  property  to  the  whole  assessed  value  of 
property  has  steadily  fallen  from  50  per  cent  in  1861 
to  34  per  cent  in  1874,  26  per  cent  in  1880,  and  ISVa 
per  cent  in  1894.  *  *  *  While  improvements 
upon  land  in  San  Francisco  increased  about  one- 
third  in  six  years,  money  fell  ofl^  more  than  two- 
thirds,  and  other  personal  property  nearly  one-third. 
In  the  rest  of  the  State,  which  is  mainly  agricul- 
tural, the  value  of  improvements  increased  nearly 
one-half;  personal  property,  other  than  money,  in- 
creased nearly  one-sixth;  while  the  loss  of  money 
among  the  farmers,  though  severe,  did  not  compare 
with  the  affliction  which  befell  the  capitalists  of  San 
Francisco.  The  general  result  was  to  reduce  the 
share  of  San  Francisco  in  the  State  tax  from  40 
per  cent  to  30  per  cent.  In  other  words,  the  city 
paid  25  per  cent  LESS,  and  the  farmers  16  2/3  per 
cent  MORE.     This  result  has  continued  ever  since. 


256  The  Problem  of  the  UnemploTjed 

"According  to  unanimous  testimony,  the  city  of 
Boston  is  so  fortunate  as  to  possess  a  board  of  assess- 
ors in  whose  honesty  and  ability  every  one  has  confi- 
dence, and  who  are  fanatical  believers  in  the  taxa- 
tion of  personal  property.  These  assessors  are  armed 
by  law  with  almost  despotic  powers  of  search  and 
with  absolutely  despotic  powers  of  valuation.   They 
can  ransack  every  man's  books;  they  can  disregard 
all  the  evidence,  when  they  have  finished.     After 
exhausting  all  their  powers   of  inquiry,   they  are 
allowed  to  meet  in  secret,  to  go  through  a  process 
of  arbitrary  assessment,  fitly  known  by  the  name  of 
'dooming.'    Their  return  of  details  for  the  year  1889 
showed  that  the  whole  amount  of  taxable  property, 
which   they   were   actually   able   to    discover,    was 
$39,000,000,  exclusive  of  bank  stock.    Being  dissat- 
isfied with  this  estimate,  which  was  all  that  was 
justified  by  any  facts  which  they  could  state,  they 
proceeded  to  multiply  it  four  and  a  half  times  by  a 
mere  guess.    In  their  dooming  chamber  they  guessed 
that  personal  property,  other  than  bank  stock,  ought 
to  be  valued  at  $186,000,000;  and  the  citizens  of 
Boston    were    compelled    to    pay   taxes    upon    that 
amount.    Could  anything  be  more  monstrous  or  more 
absurd  than  a  system  of  taxation  which,  even  when 
administered  by  phenomenally  honest  and  compe- 
tent men,  produces  such  results?     *     *     *     Almost 
the  whole  of  the  things  visible  to  Boston  assessors 
consisted   of   merchandise  and  machinery.     Taxes 
upon  these,  of  course,  if  equally  distributed,  simply 
increased  the  cost  of  goods  to  consumers,  just  as 
excise  duties  on  whisky  increases  the  cost  of  whisky 
to  drinkers.    But  it  is  manifest,  from  the  arbitrary 
increase  made  by  the  assessors,  that  these  taxes 
v/ere  not  equally  distributed,  and  therefore  one  large 
section  of  taxpayers  was  robbed  for  the  benefit  of 
the  other  section.     For  unequal  taxation  upon  pro- 
ducers makes  it  impossible  for  those  who  are  taxed 
beyond  their  just  share  to  recover  such  excess  from 
their  customers;  while  those  who  are  taxed  below 


Natural  Taxation  257 

their  share  recover  all  which  they  have  paid  under 
strictly  equal  taxation.  It  follows  that  those  who 
are  taxed  most  are  simply  plundered,  under  forms  of 
law,  for  the  profit  of  their  competitors  who  are  taxed 
least.  If  Havemeyer  and  Spreckles  were  the  only 
refiners  of  sugar,  and  both  were  taxed  equally  upon 
their  production,  both  would  recover  the  tax  from 
their  customers.  But  if  Havemeyer  should  be  taxed, 
while  Spreckles  went  free,  Spreckles  could  undersell 
Havemeyer,  who  would  be  practically  robbed  for 
Spreckles'  benefit.     *     *     * 

'*In  Illinois  an  even  more  drastic  method  prevails. 
A  Board  of  Equalization,  if  of  the  opinion  that  the 
valuation  of  any  county  is  too  low,  increases  every- 
body's taxes  fourfold,  on  the  assumption  that  all 
have  made  false  returns  alike.  Thus  the  conscien- 
tious taxpayer  is  made  to  feel  that  virtue  must 
indeed  be  its  own  reward." 

The  poorer  classes,  including  the  small  farmer  and 
the  modest  home  owner  in  town  or  city,  are  those 
who  suffer  most  from  any  maladjustment  of  the 
powers  of  government.  For  not  only  are  the  rich 
better  able  to  stand  the  losses  resulting  from  it,  but 
it  is  easier  for  them  to  evade  or  ward  off  the  ill 
effects  of  legislation  which  violates  the  natural  law. 
This  is  nowhere  more  manifest  than  in  matters  of 
taxation.  Thus,  the  buildings  and  improvements  of 
small  farmers  and  home  owners  in  moderate  circum- 
stances everywhere  approach  a  certain  degree  of  uni- 
formity, and  the  approximate  value  of  improvements 
of  this  class  is  a  matter  of  common  knowledge.  It 
is,  therefore,  difficult  to  under-appraise  them  for 
taxation.  Not  so,  however,  as  regards  the  palaces 
of  the  rich  and  the  immensely  valuable  improve- 
ments in  the  cities.  Again,  in  the  country,  every 
one  has  more  or  less  knowledge  of  his  neighbor's 


258  The  Problem  of  the  Unemployed 

business,  of  the  live  stock  which  he  owns  and  the 
amount  of  money  which  he  may  have  loaned  out, 
etc.  This  is  not  the  case  in  cities  and  towns ;  hence 
tax  assessors  in  small  places  are  more  likely  to  list 
a  greater  percentage  of  personal  property  than  in 
larger  communities.  In  fact,  experience  shows  that 
this  is  nearly  always  so,  and  the  burden  of  this 
species  of  taxation  falls  with  greater  weight  upon 
the  country  than  upon  the  town,  upon  the  man  of 
small  means  than  upon  the  man  of  large  means.  Not 
only  so,  but  the  man  in  moderate  circumstances  can- 
not afford,  like  the  millionaire,  to  spend  time  and 
money,  legitimately  or  otherwise,  on  tax  assessors 
and  boards  of  appraisement  for  the  purpose  of  se- 
curing a  small  rendition  and  low  assessment  of  his 
property.  And  so  in  every  State  in  the  Union,  not- 
withstanding all  kinds  of  legislation  to  prevent  it, 
the  greater  a  man's  possessions  in  stocks  and  bonds 
and  personal  property  generally,  as  well  as  in  im- 
provements on  land,  the  less  in  proportion  are  the 
taxes  which  he  pays  on  property  of  this  kind,  com- 
pared with  the  man  of  moderate  means.  While  the 
tax  collector  is  sometimes  able  to  list  thirty  or  forty 
per  cent  of  the  poor  man's  wealth  in  personal  prop- 
erty and  improvements  he  is  compelled  to  let  the 
rich  man  off  on  far  better  terms. 

As  shown  in  previous  chapters,  a  tax  on  economic 
rent,  or,  in  other  words,  a  tax  on  land  alone,  accord- 
ing to  its  value  without  reference  to  improvements, 
is  a  tax  on  privilege.  It  is  merely  the  taking  by  the 
government  of  a  portion  of  the  tribute  paid  for  the 
privilege  of  employment,  which  would  otherwise  go 
to  individuals ;  while  a  tax  on  the  products  of  indus- 
try is,  in  effect,  the  levying  of  a  fine  on  enterprise. 


Natural  Taxation  259 

On  the  average,  the  more  valuable  the  land  the  less 
valuable  in  proportion  are  the  improvements  which 
rest  upon  it.  Thus  in  a  small  place  a  mechanic  puts 
up  a  thousand  or  fifteen  hundred  dollar  house  on  a 
five  hundred  dollar  lot,  while  in  the  best  residence 
portions  of  a  city  the  ground  on  which  a  handsome 
dwelling  is  built  usually  costs  as  much  if  not  more 
than  the  building  itself,  and  in  the  business  districts 
this  is  almost  invariably  the  case.  In  New  York, 
for  instance,  as  already  mentioned,  land  values  on 
Manhattan  Island,  exclusive  of  improvements,  are 
assessed  at  $4,000,000,000,  while  improvement  val- 
ues are  assessed  at  only  about  half  that  amount,  and 
in  that  city  there  are  comparatively  few  buildings 
which  are  as  valuable  as  the  land  on  which  they 
stand.  As  to  the  farmer,  the  less  valuable  the  land 
which  he  cultivates,  the  more  valuable  in  proportion 
are  the  improvements  and  personal  property  upon 
it,  including  the  value  of  the  work  done  in  reducing 
the  land  to  cultivation.  This  is  the  rule  when  land 
in  actual  cultivation  only  is  considered,  but  it  cannot 
apply  when  much  of  the  farmer's  land  is  unim- 
proved, and  when  he  is  in  fact  more  of  a  land  specu- 
lator than  a  farmer. 

It  is  thus  evident  that  every  one  whose  personal 
property  and  improvements  exceed  the  value  of  his 
land  will  be  directly  benefited  by  the  transfer  of 
taxes  from  the  products  of  labor  to  land  alone,  or, 
in  other  words,  by  the  remission  of  fines  upon  indus- 
try, and  the  consequent  increase  of  taxes  on  privi- 
lege. That  this  would  result  in  the  reduction  of  the 
direct  taxes  of  an  overwhelming  majority  of  the  land 
owners  of  this  country,  including  the  farmers,  is 


260  The  Problem  of  the  Unemployed 

clearly  shown  in  the  work  on  Natural  Taxation 
already  referred  to.* 

Indirect  taxes,  such  as  those  raised  by  means  of  a 
tariff  on  imported  goods,  and  those  levied  through 
the  internal  revenue  department  of  this  country,  are 
collected  impartially  from  all  consumers,  rich  and 
poor  alike;  but  such  taxes  involve  enormous  waste, 
and  bear  with  crushing  weight  upon  the  small  prop- 
erty owner  as  well  as  upon  the  poor  who  have  no 
property  at  all.  The  merchants  who  sell  goods  which 
have  been  taxed  by  this  method  must  collect  from 
the  consumer  not  only  the  amount  originally  paid 
the  government  on  the  article  taxed,  but  enough  more 
to  provide  a  profit  for  himself  and  for  all  who  have 
previously  handled  it,  on  the  additional  outlay  of 
capital  thus  required.  This,  like  all  attempts  to  tax 
wealth  generally,  has  the  effect  of  reducing  the 
purchasing  power  of  wages  in  this  country  15  per 
cent  or  more.f  In  other  words,  if  we  could  abolish 
indirect  taxation  and  all  taxes  levied  upon  the  prod- 
ucts of  industry,  without  in  any  way  shifting  the 
burden  upon  consumers,  the  income  of  all  workers 
would  in  effect  be  increased  at  least  15  per  cent  from 
this  cause  alone. 

Our  present  method  of  raising  public  revenues  is 
well  characterized  by  Mr.  Shearman  as  "crooked 
taxation."  It  is  crooked,  because,  while  based  in 
some  instances  on  the  theory  apparently  of  making 
those  who  have  the  most  pay  the  most,  in  practical 


*The  subject  of  this  chapter  is  so  thoroughly  and  interest- 
ingly covered  in  Shearman's  "Natural  Taxation,"  that  nothing 
more  than  a  mere  outline  of  the  single  tax  will  be  attempted 
In  this  work. 


fSee  Natural  Taxation,  Chapter  II, 


Natural  Taxation  261 

operation  it  compels  every  citizen,  whether  a  prop- 
erty owner  or  not,  to  contribute  to  the  support  of 
the  government,  not  according  to  his  ability  to  pay, 
nor  according  to  benefits  received,  but  according  to 
the  number  of  mouths  he  must  feed  and  the  number 
of  backs  he  must  clothe.  For  the  effect  of  all  at- 
tempts to  tax  wealth  is  to  increase  the  prices  of 
things  taxed,  or  the  amount  paid  for  the  use  of  them. 
In  the  long  run,  and  on  the  average,  the  consumer  or 
the  user  reimburses  the  property  owner  for  all  taxes 
w^hich  the  property  owner  pays  on  the  things  which 
the  consumer  uses  or  consumes.  The  tax  on  a  build- 
ing, for  instance,  is  taken  into  account  in  fixing  the 
rent  of  the  tenant,  as  much  so  as  the  cost  of  insur- 
ance, repairs  and  janitor  service.  As  a  general  rule, 
an  additional  tenement  will  not  be  put  up  in  any 
locality  until  the  demand  is  strong  enough  to  enable 
the  owner  to  collect  sufficient  rent  to  cover  taxes 
on  the  building  as  well  as  interest  on  the  cost  of  it. 
Hence  tenants  pay  the  taxes  assessed  against  tene- 
ment house  improvements.  So  also,  if  it  were  pos- 
sible to  tax  credits  with  any  degree  of  uniformity, 
rates  of  interest  would  rise,  and  users  of  capital 
borrowed  would  in  effect  pay  the  taxes  levied  against 
lenders. 

Not  only  is  the  present  system  of  taxation  crooked 
in  that  it  enables  those  who  in  the  first  instance  pay 
taxes  on  wealth  to  largely  shift  the  burden  upon 
those  who  must  use  or  buy  the  articles  taxed,  but,  in 
the  very  nature  of  things,  such  taxation  falls  with 
crushing  effect  upon  the  poor,  as  compared  with  its 
effect  upon  the  rich.  This  is  so  because  taxes  must 
always  be  paid  out  of  the  taxpayer's  possible  savings. 
The  average   working  man   in  the   United   States, 


262  The  Problem  of  the  Unemployed 

taking  into  account  the  time  lost  in  involuntary  idle- 
ness, earns  less  than  $400  a  year.*  Of  this  amount 
he  uses,  say  $395  for  support  of  himself  and  family 
(little  enough,  surely),  leaving  possibly  $5  a  year 
to  lay  by  for  old  age !  If  no  taxes  were  levied  on  the 
products  of  industry,  i.  e.,  on  wealth,  and  if  taxes 
were  so  levied  that  the  burden  could  not  be  shifted, 
the  laborer's  income,  and  all  incomes  derived  from 
labor,  would,  as  shown  by  Mr.  Shearman,  be  ad- 
vanced 15  per  cent  or  more.  In  other  words,  the 
average  working  man  could  live  just  as  comfortably 
then  on  $335  a  year  as  he  can  now  on  $395.  He 
could  just  as  easily  save  $60  a  year  then  as  he  can 
save  $5  a  year  now.  His  possible  savings  would  be 
increased  twelve-fold.  He  could  save  money  twelve 
times  as  fast.  The  burden  of  taxation  at  present, 
therefore,  is  so  adjusted  as  to  take  eleven-twelfths 
or  more  of  the  possible  savings  of  the  average  work- 
ing man,  or  nearly  one-sixth  of  his  entire  income. 

When  we  .think  of  the  taxpayers  of  a  community, 
we  usually  leave  out  of  consideration  the  heaviest 
taxpayers  of  all,  the  people  who  own  no  taxable  prop- 
erty. We  lose  sight  of  this  truth,  because  of  our 
crooked  system  of  taxation ;  it  is  unwittingly,  yet 
skillfully,  arranged  to  increase  the  burdens  of  the 
poor  to  the  benefit  of  the  rich,  without  either  rich  or 
poor  suspecting  that  such  is  in  fact  the  case. 

Take  another  illustration:  The  direct  taxes  of  a 
farmer  worth  $10,000,  who  has  an  income  of  $1,000, 
are,  say,  $100  a  year.  He  can  live  comfortably  on 
$800.  His  possible  savings,  therefore,  amount  to 
$200  annually,  one-half  of  which  is  consumed  in  the 

*See   "Natural   Taxation";    also  Carroll  D.  Wright's   "Prac- 
tical Sociology." 


Natural  Taxation  263 

paj^ment  of  direct  taxes ;  hence  his  net  savings 
amount  to  $100  a  year.  He  has  a  neighbor  worth 
twice  as  much,  or  $20,000,  whose  direct  taxes  are 
therefore  twice  as  great,  or  $200.  Suppose  this 
neighbor's  income  to  be  twice  as  great  also,  or  $2,000 
a  year.  The  neighbor  can  also  live  comfortably  on 
$800  a  year;  his  possible  savings,  therefore,  are 
$1,200,  of  which  $200,  or  only  one-sixth,  is  consumed 
in  the  payment  of  direct  taxes,  and  his  net  savings 
amount  to  $1,000  a  year.  The  burden  of  direct  taxa- 
tion upon  the  farmer  worth  $10,000  is  therefore  ten 
times  as  heavy  as  upon  the  farmer  worth  $20,000. 
The  latter,  although  worth  but  twice  as  much,  can 
live  as  well  as  the  former  and  yet  save  ten  times  as 
much.  And  so,  "The  destruction  of  the  poor  is  their 
poverty." 

If  these  comparisons  be  extended  so  as  to  include 
incomes  of  a  million  dollars  and  upwards,  it  will  be 
seen  that  the  burden  of  taxation  often  bears  upon 
the  man  with  a  small  income  a  thousand  and  some- 
times ten  thousand  times  heavier  than  upon  million- 
aires and  multi-millionaires.  The  result  of  this 
crookedness  is  to  render  it  more  difficult  for  the 
poor,  and  less  difficult  for  the  rich,  to  accumulate 
savings  than  would  otherwise  be  the  case.  This  to 
some  extent  explains  the  fact  that  while  the  number 
of  those  who  have  large  fortunes  is  rapidly  increas- 
ing in  America,  the  percentage  of  the  total  popula- 
tion who  have  no  taxable  property  at  all  is  increas- 
ing much  faster. 

It  may  be  said  in  reply  that  an  overwhelming 
majority  of  workingmen  would  continue  to  spend  all 
they  made  as  fast  as  made,  no  matter  to  what  extent 
wages  were  advanced;  but  even  so,  a  permanent 


264  The  Problem  of  the  Unemployed 

increase  in  the  purchasing  power  of  wages  would 
nevertheless  make  it  easier  for  thrifty  workingmen 
to  save.  More  therefore  would  save.  The  number 
of  property  owners  would  be  increased  and  the  foun- 
dations of  good  government  would  be  broadened. 
At  present  extraordinary  strength  of  character  is 
necessary  to  enable  one  to  support  himself  and  fam- 
ily and  save  anything  on  $400  a  year.  The  few  who 
are  thus  endowed  usually  rise  above  their  fellows 
and  become  employers  and  managers  themselves. 
The  causes  of  increasing  discontent  in  the  ranks, 
however,  cannot  be  safely  ignored  simply  because 
privates  who  deserve  promotion  have  the  chance 
of  attaining  it. 

Should  the  present  ratio  of  increase  of  tenants  on 
farms  and  in  the  cities  and  towns  be  maintained  for 
a  few  decades  longer,  less  than  one  per  cent  of  the 
families  of  America  will  soon  own  the  land  on  which 
the  other  ninety-nine  per  cent  must  live.  It  is  evi- 
dent that  the  mildly  restraining  powers  of  a  free 
government  will  be  utterly  incapable  of  coping  with 
the  forces  of  discontent  which  the  house  of  Want 
will  then  marshal  against  the  house  of  Have.  And 
unfortunately  this  kind  of  discontent  is  intensified 
rather  than  alleviated  by  common  schools  and  the 
spread  of  intelligence  generally.  Hence,  just  in  pro- 
portion as  we  approach  the  conditions  referred  to, 
government  by  injunction,  martial  law  and  methods 
of  like  character  will  become  more  and  more  fre- 
quently necessary.  A  "strong  government"  must  in 
the  end  appear,  which  will  habitually  ignore  all  con- 
stitutional guarantees  of  individual  freedom.  Was 
not  something  of  this  kind  recently  seen  in  Colorado  ? 

It  is  evident  that  methods  for  raising  the  public 


Natural  Taxation  265 

revenue,  which  waste  so  much  in  the  collecting, 
which  put  a  premium  upon  fraud  and  perjury,  which 
impose  fines  upon  industry,  which  shift  the  burden 
from  the  rich  to  the  poor,  and  tend  to  steadily  lessen 
the  size  of  the  property-owning  class,  cannot  con- 
form to  the  natural  law.  But  it  is  claimed  in  some 
quarters  that  there  is  no  natural  law  pertaining  to 
taxation ;  that  nature  has  given  no  intimation  of  any 
plan  by  which  means  for  satisfying  the  increasing 
social  or  governmental  wants  of  mankind  can  be 
obtained  without  waste,  confusion  and  injustice. 
Can  this  be  so  when  all  human  progress  is  the  result 
of  the  effort  of  man  to  ascertain  the  natural  law,  be 
it  moral  or  physical,  and  conform  his  actions  to  it? 
In  no  other  way  does  he  conquer  nature ;  in  no  other 
way  can  he  conquer  himself. 

Man's  relation  to  his  fellow-men,  and  to  the  land 
on  which  all  must  live,  is  such  that  government  is 
necessary.  It  is  necessary  not  only  to  prevent  the 
strong  from  imposing  upon  the  weak,  but  to  enable 
man  to  rise  above  the  tyranny  of  physical  environ- 
ment and  most  effectively  subject  to  his  use  the 
forces  of  the  universe.  Government,  for  instance, 
enables  him  to  lay  out  and  improve  highways,  with- 
out which  he  could  never  have  risen  from  the  savage 
state.  It  enables  him  to  dot  the  seacoast  with  light- 
houses and  life-saving  crews,  to  warn  the  mariner 
and  the  farmer  of  approaching  storms,  to  conserve 
life  and  health  by  public  sanitary  measures,  and  at  a 
minimum  of  effort  to  provide  means  of  education 
through  public  schools  and  means  of  communication 
through  public  mails.  Government  is  necessarily 
something  more  than  the  big  policeman,  whose  du- 
ties, it  is  claimed  by  the  laissez  fair^e  school  of  econ- 


266  The  Probleyn  of  the  Unemployed 

omists,  should  end  with  the  preservation  of  order. 
Government  is  in  effect  a  great  co-operative  organ- 
ization, actively  engaged  even  now  in  assisting  men 
in  the  production  of  wealth.  And  it  is  more  than 
probable  that,  with  increase  of  intelligence  and  im- 
provements in  morals,  the  functions  of  government 
will  be  largely  extended,  and  an  immense  saving  of 
human  energy  thus  effected  which  would  otherwise 
be  wasted  in  misapplied  efforts  and  senseless  com- 
petition. 

To  enable  government  to  best  serve  the  people  in 
the  constantly  extending  sphere  of  its  activities,  a 
constantly  increasing  revenue  is  necessary.  Since 
this  revenue  is  to  be  used  for  the  benefit  collectively 
of  all  the  people,  would  not  the  ideal  fund  from  which 
it  should  be  drawn  by  taxation  be  a  fund  produced 
collectively  by  all  the  people?  If  there  is  such  a 
fund,  if  taxes  can  be  so  adjusted  as  to  be  drawn 
entirely  from  it,  would  it  not  seem  as  though  this 
fund  had  been  created  for  this  very  purpose? 
Would  not  the  natural  law  clearly  indicate  that  this 
fund,  produced  by  the  common  energy  and  enterprise 
of  all,  ought  first  to  be  used  by  the  government  for 
the  benefit  of  all,  before  drawing  from  funds  pro- 
duced by  individual  effort? 

In  land  values,  we  have  in  all  respects  a  fund  of 
the  character  above  indicated. 

The  value  which  a  certain  tract  of  land  has,  exclu- 
sive of  all  improvements  on  it,  depends  not  on  what 
its  owner  does,  but  upon  what  the  people  collectively 
do.  If  they  settle  around  it  and  improve  adjoining 
lands,  they  collectively  create  and  bestow  upon  this 
particular  tract  additional  values ;  if  they  move  away 
from  it,  if  the  population  of  the  neighborhood  de- 


Natural  Taxation  267 

creases,  the  value  of  the  land  decreases  also.  And 
when  public  revenues  are  expended  in  its  vicinity 
in  the  improvement  of  streets  and  highways,  and  in 
the  maintenance  of  good  schools  and  good  govern- 
ment generally,  the  land  is  thereby  directly  enhanced 
in  value.  And  as  population  and  the  needs  of  gov- 
ernment increase  in  any  community,  the  land  value 
fund  of  that  community  automatically  increases  in 
like  proportion  in  accordance  with  an  apparently 
preconceived  plan  to  supply  in  this  way  a  fund  with 
which  to  meet  the  growing  wants  of  government. 

If  nature  has  decreed  that  the  values  attaching  to 
land  shall  ultimately  be  appropriated  by  taxation  for 
the  common  benefit  of  the  people  who  in  common 
create  them,  then  none  of  the  evils  connected  with 
attempts  to  tax  wealth*  which  have  been  pointed  out 
should  flow  from  the  taxation  of  land  values.  In 
point  of  fact,  a  tax  on  land  alone,  according  to  its 
value,  and  not  in  excess  of  economic  rent,  can  never 
give  rise  to  such  evils.  For  such  a  tax  is  merely  the 
appropriation  by  the  government  of  tribute  money 
which  would  otherwise  be  appropriated  by  indi- 
viduals. 

If  we  consider  the  effects  which  would  result  from 
levying  all  direct  taxes  on  land  values  alone,  we  find 
that  none  of  the  objections  which  necessarily  flow 
from  all  attempts  to  tax  wealth  would  apply.  In  the 
first  place,  such  a  system  of  taxation  would  con- 
stantly tend  to  lessen  instead  of  constantly  tending 
to  increase  the  burden  of  small  property  owners; 


*The  meaning  of  wealth  as  used  in  this  chapter  and  else- 
where in  this  work  must  not  be  confused  with  the  broader 
popular  definition  of  the  word. 


268  The  Problem  of  the  U7iemployed 

it  would  tend  to  distribute  wealth  among  the  many 
rather  than  to  concentrate  it  among  the  few. 

Again,  no  taxpayer  would  have  the  slightest  incli- 
nation to  commit  perjury.  It  would  be  impossible 
for  him  to  conceal  his  land,  and  it  would  be  useless 
for  him  to  place  any  value  upon  it.  The  improve- 
ments on  any  particular  tract  of  land  not  being  con- 
sidered in  determining  its  value,  tax  assessors  and 
boards  of  appraisers  would  fix  the  values  of  all 
lands  by  reference  to  maps  showing  the  location  of 
the  property,  and  without  regard  to  the  ownership 
of  it.  In  fact,  no  other  course  would  be  possible, 
since  excuses  could  not  be  trumped  up  for  placing 
different  values  upon  tracts  in  the  same  neighbor- 
hood having  in  fact  the  same  value.  Every  prop- 
erty owner  would  be  able  to  compare  the  valuation 
placed  upon  his  own  land  with  that  placed  upon  his 
neighbor's,  unembarrassed  by  questions  relating  to 
the  value  of  improvements;  hence  almost  absolute 
uniformity  of  taxation  would  be  secured,  and  this, 
too,  at  a  minimum  of  expense,  since  vast  hordes  of 
tax-gatherers  and  tax  officials  could  be  dispensed 
with.* 

Not  one  of  the  evils  necessarily  accompanying 
ail  attempts  to  tax  wealth,  to  which  attention  has 
been  called  in  the  preceding  pages,  can  be  urged 
against  the  system  of  natural  taxation  referred  to 
in  this  chapter.  Not  only  would  taxpayers  be  re- 
lieved from  all  attempts  on  the  part  of  dishonest 
tax  officials  to  extort  blackmail,  not  only  would 
unfair  discriminations  between  individuals  be  ren- 

*Many  progressive  cities  in  the  United  States  have  already 
adopted  this  plan  of  assessing  property  under  what  is  known 
as  the  "Somers  System." 


Natural  Taxation  269 

dered  practically  impossible,  but  no  one  would  then 
be  deterred  by  fear  of  increas2  of  taxation  from 
employing  labor  in  putting  improvements  on  land. 

Neither  would  there  be  any  shifting  of  the  burden 
of  taxation ;  consumers  would  reap  the  entire  benefit 
in  the  reduction  of  prices,  and  tenants  in  the  reduc- 
tion of  rents.  For  instance,  it  costs  less  than  25 
cents  a  gallon  to  manufacture  whisky,  yet  the  article 
sells  at  wholesale  for  $1.75  a  gallon  and  upwards. 
This  difference  between  the  cost  of  production  and 
the  price  paid  by  the  wholesale  dealer  results  from 
the  fact  that  whisky  is  taxed  by  the  Federal  Gov- 
ernment 90  cents  a  gallon.  The  consumer  therefore 
pays  this  tax,  together  with  the  additional  profit 
received  by  middlemen  on  account  of  the  additional 
capital  required,  by  reason  of  the  tax,  to  handle  the 
thing  taxed.  Can  one  doubt  but  that  if  the  tax  were 
removed,  consumers  would  buy  whisky  for  less  than 
30  cents  a  gallon,  instead  of  paying  $1,75  and  up- 
wards? It  is  thus  evident  that  consumers,  and  not 
manufacturers  and  dealers,  would  reap  the  benefit 
of  the  exemption  from  taxation  of  personal  prop- 
erty. 

It  is  equally  clear  that  the  renter,  and  not  the 
land-owning  landlord,  would  also  in  the  long  run 
obtain  all  the  advantages  resulting  from  exempting 
buildings  and  improvements  on  land  from  taxation. 
Take  even  the  modern  ofhce  building  as  an  illustra- 
tion, which  occasionally,  though  very  rarely  in  large 
cities,  exceeds  in  value  the  land  which  it  occupies. 
At  first  thought  one  might  conclude  that  owners  of 
properties  of  this  kind  would  reap  the  benefit,  and 
not  the  tenants  who  occupy  them.  For  the  first 
year  or  two  such  might  be  the  case,  but  the  owners 


270  The  Problem  of  the  Unemployed 

of  equally  valuable  unimproved  or  but  partially  im- 
proved lots  in  the  same  neighborhood  could  not  afford 
to  have  their  taxes  doubled,  without  any  increase 
of  income  from  the  property  taxed,  as  would  be  the 
case  if  no  taxes  were  levied  on  improvements  and 
personal  property.  They  would,  therefore,  be  com- 
pelled to  put  up  improvements  themselves  of  a  char- 
acter suitable  to  the  locality.  There  being  no  taxes 
on  buildings,  it  costing  no  more  to  hold  a  tract  of 
land  with  a  suitable  improvement  on  it  than  to  hold 
it  in  partial  or  absolute  idleness,  land  owners  would 
respond  more  quickly  than  under  present  conditions 
to  an  increased  demand  for  tenements.  Competition 
among  landlords  for  tenants  would  therefore  reduce 
rents.* 

Reflection  will  satisfy  the  reader  that  a  tax  on  land 
values  cannot  be  shifted,  so  long  as  it  does  not  exceed 
the  economic  rent  of  the  land;  that  it  is  always  a 
straight  tax,  and  never  a  crooked  one ;  that  it  must 
always  be  paid  by  the  land  owner  in  the  end,  and 
never  by  any  one  else.  This  is  so,  because  it  is  an 
appropriation  by  the  government  of  a  portion  of 
the  economic  rent,  or  a  portion  of  the  increase  in  the 
value  of  land,  which  would  otherwise  be  appropri- 
ated by  the  land  owner.  A  tax  on  buildings  increases 
the  amount  which  must  be  paid  for  the  use  of  them ; 
a  tax  on  money  or  on  credits  (if  it  could  be  collected) 
would  increase  rates  of  interest ;  a  tax  on  food,  cloth- 
ing, or  any  other  article  of  consumption,  increases 
its  cost  to  the  consumer;  but  a  tax  on  land  values 
has  just  the  opposite  effect,  it  simply  makes  land 
cheaper.     It  increases  the  difficulty  of  holding  land 

*See  pages  206  and  207. 


Natural  Taxation  271 

in  idleness ;  and  if  the  tax  were  gradually  increased 
this  difficulty  would  be  gradually  increased  also, 
until  the  time  would  finally  come  when  all  idle  land 
would  be  free  land ;  and  hence  the  paradox  that  the 
wealthy  would  be  the  least  benefited  by  abolishing 
taxes  on  wealth. 


APPENDIX. 

THE  RIGHT  TO  THE  USE  OF  THE  EARTH. 

THE  following  is  from  the  first  edition  of  Mr. 
Herbert   Spencer's   "Social    Statics,"    Chapter 
IX,  on  'The  Right  to  the  Use  of  the  Earth":* 

*'l.  Given  a  race  of  beings  having  like  claims  to 
pursue  the  objects  of  their  desires — given  a  world 
adapted  to  the  gratification  of  those  desires — a  world 
into  \vhich  such  beings  are  similarly  born,  and  it 
unavoidably  follows  that  they  have  equal  rights  to 
the  use  of  this  world.  For  if  each  of  them  'has 
freedom  to  do  all  that  he  wills,  provided  he  infringes 
not  the  equal  freedom  of  any  other,'  then  each  of 
them  is  free  to  use  the  earth  for  the  satisfaction  of 
his  wants,  provided  he  allows  all  others  the  same 
liberty.  And  conversely,  it  is  manifest  that  no  one, 
or  part  of  them,  may  use  the  earth  in  such  a  way  as 
to  prevent  the  rest  from  similarly  using  it;  seeing 
that  to  do  this  is  to  assume  greater  freedom  than  the 
rest,  and  consequently  to  break  the  law. 

"2.  Equity,  therefore,  does  not  permit  property 
in  land.  For  if  one  portion  of  the  earth's  surface 
may  justly  become  the  possession  of  an  individual, 
and  may  be  held  by  him  for  his  sole  use  and  benefit, 
as  a  thing  to  which  he  has  an  exclusive  right,  then 
othe)-  portions  of  the  earth's  surface  may  be  so  held ; 
and  eventually  the  ivhole  of  the  earth's  surface  may 
be  so  held ;  and  our  planet  may  thus  lapse  altogether 
into  private  hands.  Observe  now  the  dilemma  to 
which  this  leads.     Supposing  the  entire  habitable 

♦This  chapter  was  omitted  in  the  subsequent  odltlons  of 
"Social  Statics." 


274  Appendix 

globe  to  be  so  enclosed,  it  follows  that  if  the  land 
owners  have  a  valid  right  to  its  surface,  all  who 
are  not  land  owners  have  no  right  at  all  to  its  surface. 
Hence,  such  can  exist  on  the  earth  by  sufferance  only. 
They  are  all  trespassers.  Save  by  the  permission  of 
the  lords  of  the  soil,  they  can  have  no  room  for  the 
soles  of  their  feet.  Nay,  should  the  others  think  fit 
to  deny  them  a  resting  place,  these  landless  men 
might  equitably  be  expelled  from  the  earth  alto- 
gether. If,  then,  the  assumption  that  land  can  be 
held  as  property  involves  that  the  whole  globe  may 
become  the  private  domain  of  a  part  of  its  inhab- 
itants ;  and  if,  by  consequence,  the  rest  of  its  inhab- 
itants can  then  exercise  their  faculties — can  then 
exist  even — only  by  consent  of  the  land  owners;  it 
is  manifest,  that  an  exclusive  possession  of  the  soil 
necessitates  an  infringement  of  the  law  of  equal 
freedom.  For  men  who  cannot  'live  and  move  and 
have  their  being'  without  the  leave  of  others,  cannot 
be  equally  free  with  those  others. 

"3.  Passing  from  the  consideration  of  the  possi- 
ble to  that  of  the  actual,  Vv-e  find  yet  further  reason 
to  deny  the  rectitude  of  property  in  land.  It  can 
never  be  pretended  that  the  existing  titles  to  such 
property  are  legitimate.  Should  any  one  think  so, 
let  him  look  in  the  chronicles.  Violence,  fraud,  the 
prerogative  of  force,  the  claims  of  superior  cun- 
ning— these  are  the  sources  to  which  those  titles 
may  be  traced.  The  original  deeds  were  written 
with  the  sword,  rather  than  with  the  pen ;  not  law- 
yers, but  soldiers,  were  the  conveyancers;  blows 
were  the  current  coin  given  in  payment;  and  for 
seals,  blood  was  used  in  preference  to  wax.  Could 
valid  claim  be  thus  constituted?  Hardly.  And  if 
not,  what  becomes  of  the  pretensions  of  all  subse- 
quent holders  of  estates  so  obtained?  Does  sale  or 
bequest  generate  a  right  where  it  did  not  previously 
exist?  Would  the  original  claimants  be  nonsuited  at 
the  bar  of  reason,  because  the  thing  stolen  from 
them  had  changed  hands?     Certainly  not.     And  if 


A'ppendix  275 

one  act  of  transfer  can  give  no  title,  can  many? 
No ;  though  nothing  be  multiplied  forever,  it  will  not 
produce  one.  Even  the  law  recognizes  this  prin- 
ciple. An  existing  holder  must,  if  called  upon, 
substantiate  the  claims  of  those  from  whom  he  pur- 
chased or  inherited  his  property;  and  any  flaw  in 
the  original  parchment,  even  though  the  property 
should  have  had  a  score  of  intermediate  owners, 
quashes  his  right. 

"  'But  Time,'  say  some,  'is  a  great  legalizer.  Im- 
memorial possession  must  be  taken  to  constitute  a 
legal  claim.  That  which  has  been  held  from  age 
to  age  as  private  property,  and  has  been  bought  and 
sold  as  such,  must  now  be  considered  as  irrevocably 
belonging  to  individuals.'  To  which  proposition  a 
willing  assent  shall  be  given  when  its  propounders 
can  assign  it  a  definite  meaning.  To  do  this,  how- 
ever, they  must  find  satisfactory  answers  to  such 
questions  as,  How  long  does  it  take  for  what  was 
originally  a  wrong  to  grow  into  a  right?  At  what 
rate  per  annum  do  invalid  claims  become  valid?  If 
a  title  gets  perfect  in  a  thousand  years,  how  much 
more  than  perfect  will  it  be  in  two  thousand  years? 
— and  so  forth.  For  the  solution  of  which  they  will 
require  a  new  calculus. 

"Whether  it  may  be  expedient  to  admit  claims  of 
a  certain  standing,  is  not  the  point.  We  have  here 
nothing  to  do  with  the  considerations  of  conventional 
privilege  or  legislative  convenience.  We  have  simply 
to  inquire  what  is  the  verdict  given  by  pure  equity 
in  the  matter.  And  this  verdict  enjoins  a  protest 
against  every  existing  pretension  to  the  individual 
possession  of  the  soil ;  and  dictates  the  assertion  that 
the  right  of  mankind  at  large  to  the  earth's  surface 
is  still  valid ;  all  deeds,  customs  and  laws  notv/ith- 
standing.     *     *     * 

"9.  No  doubt  great  difficulties  must  attend  the 
resumption,  by  mankind  at  large,  of  their  rights  to 
the  soil.  The  question  of  compensation  to  existing 
proprietors  is  a  complicated  one — one  that  perhaps 


276  Appendix 

cannot  be  settled  in  a  strictly  equitable  manner. 
Had  we  to  deal  with  the  parties  who  originally 
robbed  the  human  race  of  its  heritage,  we  might 
make  short  work  of  the  matter.  But,  unfortunately, 
most  of  our  present  landowners  are  men  who  have, 
either  mediately  or  immediately — either  by  their 
own  acts,  or  by  the  acts  of  their  ancestors — given 
for  their  estates  equivalents  of  honestly  earned 
wealth,  believing  that  they  were  investing  their  sav- 
ings in  a  legitimate  manner.  To  justly  estimate  and 
liquidate  the  claims  of  such,  is  one  of  the  most  intri- 
cate problems  society  will  one  day  have  to  solve. 
But  with  this  perplexity  and  our  extrication  from 
it,  abstract  morality  has  no  concern.  Men  having 
got  themselves  into  the  dilemma  by  disobedience  to 
the  law,  must  get  out  of  it  as  well  as  they  can ;  and 
with  as  little  injury  to  the  landed  class  as  may  be. 

"Meanwhile,  we  shall  do  well  to  recollect  that  there 
are  others  beside  the  landed  class  to  be  considered. 
In  our  tender  regard  for  the  vested  interest  of  the 
few,  let  us  not  forget  that  the  rights  of  the  many  are 
in  abeyance,  and  must  remain  so,  as  long  as  the  earth 
is  monopolized  by  individuals.  Let  us  remember, 
too,  that  the  injustice  thus  inflicted  on  the  mass  of 
mankind  is  an  injustice  of  the  gravest  nature.  The 
fact  that  it  is  not  so  regarded  proves  nothing.  In 
early  phases  of  civilization  even  homicide  is  thought 
lightly  of.  The  suttees  of  India,  together  with  the 
practice  elsewhere  followed  of  sacrificing  a  hecatomb 
of  human  victims  at  the  burial  of  a  chief,  shows 
this;  and  probably  cannibals  consider  the  slaughter 
of  those  whom  'the  fortune  of  war'  has  made  their 
prisoners,  perfectly  justifiable.  It  was  once  also 
universally  supposed  that  slavery  was  a  natural  and 
quite  legitimate  institution — a  condition  into  which 
some  were  born,  and  to  which  they  ought  to  submit 
as  to  a  Divine  ordination ;  nay,  indeed,  a  great  pro- 
portion of  mankind  hold  this  opinion  still.  A  higher 
social  development,  however,  has  generated  in  us  a 
better  faith,  and  we  now,  to  a  considerable  extent. 


Appendix  277 

recognize  the  claims  of  humanity.  But  our  civiliza- 
tion is  only  partial.  It  may  by-and-by  be  perceived 
that  Equity  utters  dictates  to  which  we  have  not 
yet  listened ;  and  men  may  then  learn  that  to  deprive 
others  of  their  rights  to  the  use  of  the  earth,  is  to 
commit  a  crime  inferior  only  in  wickedness  to  the 
crime  of  taking  away  their  lives  or  personal  liberties. 
"10.  Briefly  reviewing  the  argument,  we  see  that 
the  right  of  each  man  to  the  use  of  the  earth,  limited 
only  by  the  like  rights  of  his  fellow-men,  is  imme- 
diately deducible  from  the  law  of  equal  freedom. 
We  see  that  the  maintenance  of  this  right  necessarily 
forbids  private  property  in  land.  On  examination 
all  existing  titles  to  such  property  turn  out  to  be 
invalid;  those  founded  on  reclamation  inclusive.  It 
appears  that  not  even  an  equal  apportionment  of 
the  earth  amongst  its  inhabitants  could  generate  a 
legitimate  proprietorship.  We  find  that  if  pushed 
to  its  ultimate  consequences,  a  claim  to  exclusive 
possession  of  the  soil  involves  a  land-owning  despot- 
ism. We  further  find  that  such  a  claim  is  constantly 
denied  by  the  enactments  of  our  legislature.  And 
we  find  lastly,  that  the  theory  of  the  co-heirship  of 
all  men  to  the  soil  is  consistent  with  the  highest 
civilization ;  and  that,  hov/ever  difficult  it  may  be  to 
embody  that  theory  in  fact.  Equity  ster?  ly  com- 
mands it  to  be  done." 


INDEX 

Alabama:     Effect  of  discovery  of  coal  in,  148. 

Agriculture:     Wages  as  standard,  83. 

Bellamy:     Vision  of,  245. 

Boston:     Public  Ownership  in,  243. 

Capital:  Definition,  22;  Relation  to  wages,  23;  First  appear- 
ance of,  32;  Labor  saving  machinery  and,  54; 
Labor's  dependence  on,  127;  Free  land  and,  127; 
Wealth  and,  143;  Clark's  treatment  of,  179;  In 
new  countries,  181;  Struggle  between  labor  and, 
190;  Nationalization  of  land  and,  216. 

C.\lifornl\:  "Boom"  in,  118;  Taxation  in,  254;  Wages  at  the 
time  of  placer  mining  in,  174. 

Carlyle,  Thomas:     116. 

Census:  As  to  tenant  farmers,  7;  per  capita  wealth,  7;  of 
1850  and  1910,  63;  as  to  wealth  and  population, 
214;   Massachusetts,  137. 

Charity:     Effect  on  rent,  169. 

Chicago:     School  land  in,  200. 

Clark,  John  B.:     Treatment  of  capital,  179. 

Clay,  Henry:     Tariff  and  labor,  108. 

Coal  Mines:  As  wealth,  18;  Under  nationalized  land  condi- 
tions, 233;  Of  Alabama,  148. 

Co.mpensation  to  Landlords:     Ethics  of,  222;  In  Ireland,  223. 

Consumption  of  Wealth  and  Over-production,  87. 

Copyright:     As  wealth,  14. 

Dickens,  Charles:     American  notes,  108. 

"Effort":     Defined,  174;   Labor  unions  and  individuals,  238. 

Egypii.\n  Tax  on  Olive  Trees,  248. 

"Enfield":     Parish  of,  45. 

England:     Poverty  in,  7. 

Fairbanks.  Ex-Vice  President:     As  to  wages,  59. 

Fetter,  Frank  A.:     Ownership  of  wealth  in  the  U.  S.,  7. 

George,  Henry:     Malthusian  theory  and,  79. 

Ghent,  Mr.:     "Benevolent  feudalism,"  115. 

Havemeyek,  Henry:     Trusts  and,  241. 

Idleness:     Involuntary,  69. 


Index 

Improvement:  On  land  as  wealth,  18;  Effect  of  improvements, 
Chap.  V;  Labor  saving,  53;  Labor  saving  and  in- 
terest, 54;  And  wages,  55.     (See  Labor.) 

"IxDEPEXDEXT,  The":     Extract,  114. 

Ixdia:     Famine,  78. 

LxDiAX  Territory:     Opening  reservation  in,  86. 

Ixterest:  Definition,  29;  Nature  of,  Chap.  Ill;  First  appear- 
ance of,  32;  Necessity  of  interest,  34;  On  money, 
38;  As  deferred  wages,  39;  Rent  and,  42;  In  New 
York  City,  55;  Free  land  and,  125,  181;  Rate  in 
U.  S.,  England  and  New  Zealand,  182. 

Interstate  Railroad  Commission,  184. 

Ireland:     Compensation  to  land   owners,  223. 

Japan:     Land  in  cultivation,  76;  Density  of  population,  137. 

Kansas:     Government  ownership,  244. 

Laror:  Definition,  24;  Effort  not  labor,  53;  Scarcity  of,  71; 
Temporary  scarcity  of,  72 ;  Effect  of  unemployed 
on  employed,  74;  Free  land  and,  80;  In  agri- 
cultural pursuits,  83;  Wakefield  and  labor  in 
U.  S.,  109;  Dependence  on  capital,  Chapter  X; 
Struggle  with  capital,  188;  Under  nationaliza- 
tion of  land,  216.     (See  Wages.) 

Laborer:     Efficiency  of  and  wages,  5;  Standard  of  living,  71. 

Labor  Saaing  Ina'ENtions:  Effect  of,  54;  On  land  and  wages, 
54;  On  interest,  56;  On  land,  56,  113;  Wealth 
producing  power  today,  62;  Effect  of  on  rent, 
167;  Wages,  74;  Under  natural  laws,  194;  On 
free  land,  239. 

Land:  Definition,  20;  Wealth  produced  on,  20;  Private  owner- 
ship of,  42;  Title  to,  44;  Labor  saving  inventions 
and,  56;  Cheap  land  and  wages,  74;  Real 
scarcity  of  and  employment,  76 ;  In  England  and 
Greater  New  York,  76;  Mormons  and  land,  80; 
In  suburbs,  84;  Wealth  in  purchase  of,  95; 
Speculation  in,  97;  Prohibitive  price  of,  97; 
Cheap  land  and  wages,  108;  New  Zealand  land 
laws,  110;  Increase  of  population  and,  120; 
Wealth  in  land  not  capital,  151;  Economic  rent 
of,  161;  Free  land  in  U.  S.,  174;  In  England, 
175;  In  Siberia,  177;  In  Europe,  177. 

Law:  Diminishing  returns,  79,  108;  New  Zealand  land  laws, 
110;  Malthus,  79,  109;  Supply  and  demand,  40, 
111,  185,  206;  Wages,  170,  113,  239;  Rent,  161, 
239. 

Macaulay,  Lord:     To  H.  S.  Randell,  211. 

Malthus:     Theory  of,  sec  Law. 


Index 

Mineral  Deposits  as  Wealth,  18. 

Monet:     Definition  of,  as  wealth,  15. 

Monopoly:     Genuine,  183.     (See  Trusts.) 

NATioNALiZxi.TioN  OF  Land — (See  next  page.) 

New  York  City:  Unused  land  in,  77;  Tenement  district,  102; 
suburbs,  104;  Wtiarfage  privilege,  233;  Land 
values  in,  259. 

New  Zealand:  As  to  land,  110;  Per  capita  tax,  215;  Methods 
as  to  arbitrary  prices,  243. 

Nationalization  of  Land:  Cost  of,  214;  How  accomplished, 
213;  Effect  on  land  values,  227;  On  improve- 
ments, 228;  On  mineral  deposits,  233;  Upon  in- 
vestments of  wealth,  236. 

Oklahoma:     Opening  of,  119. 

Ownership  of  Land:  Private,  42;  Government,  196;  Security 
of  property  under,  200. 

"Outlook.  The":     Extract  from,  238. 
Panics:     Cause  of,  97. 

Political  Economists  and  Private  Ownership  of  Land,  129; 
Teachings  of  New  School,  195. 

Political  Freedom  and  Industrial  SLA^•ERY,  195. 

Population:     Density  of,  137.     (See  Land.) 

Privileges:     Special.     As  wealth,  14. 

Production:     Over,  86. 

Prosperity:     Definition  of,  98. 

Rent:  Definition,  26;  Law  of  supply  and  demand,  43;  Labor- 
saving  inventions  and,  64,  193;  Economic  rent, 
161,  198,  203;  Charity  and  rent,  169;  Under  na- 
tionalization of  land,  203. 

Ricardo:     Law  of  wages,  239. 

Robinson   Crusoe:     Example,  187. 

Rogers,  Thorold:     Six  centuries  of  work  and  wages,  60. 

Shearman,  Thomas  G.  :     Natural  taxation,  200,  251,  260. 

Siheria:     Free  land  in,  177. 

Socialism:  Vision  of  Bellamy,  245,  129;  Government  owner- 
ship,  194,   242. 

Spencer,  Herrert:  "Right  to  the  Use  of  the  Earth";  Ap- 
pendix. 

Stock:     Shares  of,  as  wealth,  14. 

Tariff,  Protective:     Argument  for,  108,  241. 

Tax:  Assessment  of  New  York  City,  22;  Land  tax  of  New 
Zealand,  110;  Under  nationalization  of  land, 
200;  Window  tax,  248;  Indirect,  260.  (See 
Thomas  Shearman.) 


Index 

Taxation:  Present  condition  of,  200,  208;  Per  capita  in  U. 
S.,  215;  Natural  taxation.  Chapter  VII;  Egyp- 
tian government  tax,  248;  Russian,  248;  On 
Improvements,  250;  Gibbons'  Roman,  252;  Tax 
assessors,  253;  California,  254;  Burden  of,  257; 
Of  privilege,  258. 

Tenants:     Increase  of,  7. 

Texas:     Unused  land  in,  224. 

Wages:  Definition,  29;  Efficiency  and,  5;  Labor  saving  in- 
ventions and,  57;  In  the  Fifteenth  Century,  59; 
Effect  of  unemployed  laborers  on,  73;  Cheap 
land  and,  74;  Trade  unions  and,  136;  Law  of, 
113;  Free  land  and,  174;  Tariff  and,  183;  Em- 
ployers, 182.     (See  Labor.) 

Wakefield.  E.  Gibbons:  On  labor  in  America,  109;  Theory 
in  Russia,  177. 

Wealth:  Definition,  13;  Money  as,  15;  Improvements  on 
land  as,  18;  Mines  as,  18;  Production  of,  50;  In 
U.  S.  per  capita,  63;  Division  of,  67;  Invest- 
ment of,  94,  123;  In  land  for  speculation,  94; 
Of  farmer,  130;  Capital  and,  143;  Produced  on 
non-agricultural  lands,  159;  Distribution  of, 
Chapter  XII. 

Work:     As  a  fixed  quantity,  88;  Effect  of  lower  wages  on,  90. 

Wright.  Carroll  D.:  As  to  hours  of  labor,  59;  On  employ- 
ment,  72. 


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